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Here's Why You Should Retain Henry Schein (HSIC) Stock for Now
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Henry Schein, Inc. (HSIC - Free Report) is well-poised for growth in the coming quarters, backed by the strength of its dental business. The company’s revenue growth has been consistently supported by niche acquisitions and partnerships.
Within HSIC’s Technology and Value-Added Services business, Henry Schein One had an excellent quarter. However, weak solvency and the declining sales of PPE products and COVID-19 test kits pose challenges for the company.
In the past year, this Zacks Rank #3 (Hold) stock has increased 1.2% compared with the 15.9% growth of the industry and the 11.6% rise of the S&P 500 composite.
The leading distributor of healthcare products and services has a market capitalization of $10.34 billion. The company has an earnings yield of 6.67% compared with the industry’s 4.75%. Henry Schein surpassed estimates in three of the trailing four quarters and missed the same in one, delivering an average earnings surprise of 0.51%.
Let’s delve deeper.
Tailwinds
Favorable Dental Business Trends: The fundamentals of HSIC’s dental end markets are fueled by an aging global population, low unemployment levels and the global awareness of the healthcare benefits of preventative care and oral hygiene. Excluding sales of PPE products, local currency internal sales of Global Dental consumable merchandise increased 8.4% in the first quarter of 2023, including a 6.6% increase in North America.
Of the dental equipment, traditional equipment sales grew strongly in contrast to digital equipment comprising 2D and 3D digital imaging, mills and intra-oral scanners.
Image Source: Zacks Investment Research
Within the Dental Specialty business, implant sales growth was driven by the premium Camlog product line in Germany, Austria and Switzerland. North America reported an increase in dental specialty practices being acquired by larger dental service organizations.
Henry Schein One Holds Potential: HSIC’s dental software business has been progressing well despite a challenging business environment. In the last reported quarter, North America registered strong sales of Dentrix and Dentrix Ascend cloud-based solutions and a customer shift from the Easy Dental product, with the Easy Dental lifecycle ending later this year.
Internationally, the growth was fully supported by cloud-based solutions, particularly in Australia and New Zealand, where it was recently launched. Recently, the company announced the full integration of AI solutions into Dentrix Ascend.
Expansion Through Acquisitions & Partnerships: In April 2023, Henry Schein signed a definitive agreement to acquire S.I.N. Implant System, one of Brazil’s leading manufacturers of dental implants.
The company also completed its majority share acquisition of Biotech Dental, adding to the prospect of offering a seamless digital workflow solution. The acquisition of Unitas by Henry Schein’s subsidiary — eAssist Dental Solutions — advances and accelerates the development of value-added services offered by Henry Schein Dental and fortifies the company’s commitment to be a trusted advisor to customers.
Downsides
Q1 Negatives: In the first quarter of 2023, traditional dental equipment growth in North America was hampered by a decrease in sales of digital equipment. Lower sales of PPE products and COVID-19 test kits continued to impact the company’s performance. High operating expenses negatively affected the quarter’s adjusted operating margin.
Slightly Leveraged Balance Sheet: The total debt at the end of the first quarter was $1.31 billion, much higher than the corresponding cash and cash equivalents of $126 million. HSIC exited the quarter with a short-term payable of $291 million, displaying weak solvency.
Estimate Trend
The Zacks Consensus Estimate for HSIC’s 2023 earnings per share (EPS) has remained constant at $5.26 in the past 30 days.
The Zacks Consensus Estimate for the company’s 2023 revenues is pegged at $12.83 billion. This suggests a 1.45% rise from the year-ago reported number.
Zimmer Biomet has an earnings yield of 5.17% compared to the industry’s -1.42%. Zimmer Biomet’s earnings surpassed the Zacks Consensus Estimate in all the trailing four quarters, the average surprise being 7.38%. Its shares have rallied 32.7% against the industry’s 23.1% decline over the past year.
Penumbra, sporting a Zacks Rank #1 at present, has an estimated growth rate of 64.1% for 2024. Penumbra shares have gained 152% compared with the industry’s 9.2% rise over the past year.
PEN’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 109.4%.
Hologic, carrying a Zacks Rank #2 (Buy) at present, has an earnings yield of 4.78% compared to the industry’s -7.07%. Shares of HOLX have risen 14% compared with the industry’s 9.2% growth over the past year.
Hologic’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 27.3%.
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Here's Why You Should Retain Henry Schein (HSIC) Stock for Now
Henry Schein, Inc. (HSIC - Free Report) is well-poised for growth in the coming quarters, backed by the strength of its dental business. The company’s revenue growth has been consistently supported by niche acquisitions and partnerships.
Within HSIC’s Technology and Value-Added Services business, Henry Schein One had an excellent quarter. However, weak solvency and the declining sales of PPE products and COVID-19 test kits pose challenges for the company.
In the past year, this Zacks Rank #3 (Hold) stock has increased 1.2% compared with the 15.9% growth of the industry and the 11.6% rise of the S&P 500 composite.
The leading distributor of healthcare products and services has a market capitalization of $10.34 billion. The company has an earnings yield of 6.67% compared with the industry’s 4.75%. Henry Schein surpassed estimates in three of the trailing four quarters and missed the same in one, delivering an average earnings surprise of 0.51%.
Let’s delve deeper.
Tailwinds
Favorable Dental Business Trends: The fundamentals of HSIC’s dental end markets are fueled by an aging global population, low unemployment levels and the global awareness of the healthcare benefits of preventative care and oral hygiene. Excluding sales of PPE products, local currency internal sales of Global Dental consumable merchandise increased 8.4% in the first quarter of 2023, including a 6.6% increase in North America.
Of the dental equipment, traditional equipment sales grew strongly in contrast to digital equipment comprising 2D and 3D digital imaging, mills and intra-oral scanners.
Image Source: Zacks Investment Research
Within the Dental Specialty business, implant sales growth was driven by the premium Camlog product line in Germany, Austria and Switzerland. North America reported an increase in dental specialty practices being acquired by larger dental service organizations.
Henry Schein One Holds Potential: HSIC’s dental software business has been progressing well despite a challenging business environment. In the last reported quarter, North America registered strong sales of Dentrix and Dentrix Ascend cloud-based solutions and a customer shift from the Easy Dental product, with the Easy Dental lifecycle ending later this year.
Internationally, the growth was fully supported by cloud-based solutions, particularly in Australia and New Zealand, where it was recently launched. Recently, the company announced the full integration of AI solutions into Dentrix Ascend.
Expansion Through Acquisitions & Partnerships: In April 2023, Henry Schein signed a definitive agreement to acquire S.I.N. Implant System, one of Brazil’s leading manufacturers of dental implants.
The company also completed its majority share acquisition of Biotech Dental, adding to the prospect of offering a seamless digital workflow solution. The acquisition of Unitas by Henry Schein’s subsidiary — eAssist Dental Solutions — advances and accelerates the development of value-added services offered by Henry Schein Dental and fortifies the company’s commitment to be a trusted advisor to customers.
Downsides
Q1 Negatives: In the first quarter of 2023, traditional dental equipment growth in North America was hampered by a decrease in sales of digital equipment. Lower sales of PPE products and COVID-19 test kits continued to impact the company’s performance. High operating expenses negatively affected the quarter’s adjusted operating margin.
Slightly Leveraged Balance Sheet: The total debt at the end of the first quarter was $1.31 billion, much higher than the corresponding cash and cash equivalents of $126 million. HSIC exited the quarter with a short-term payable of $291 million, displaying weak solvency.
Estimate Trend
The Zacks Consensus Estimate for HSIC’s 2023 earnings per share (EPS) has remained constant at $5.26 in the past 30 days.
The Zacks Consensus Estimate for the company’s 2023 revenues is pegged at $12.83 billion. This suggests a 1.45% rise from the year-ago reported number.
Key Picks
Some better-ranked stocks in the broader medical space are Zimmer Biomet (ZBH - Free Report) , Penumbra (PEN - Free Report) and Hologic, Inc. (HOLX - Free Report) .
Zimmer Biomet has an earnings yield of 5.17% compared to the industry’s -1.42%. Zimmer Biomet’s earnings surpassed the Zacks Consensus Estimate in all the trailing four quarters, the average surprise being 7.38%. Its shares have rallied 32.7% against the industry’s 23.1% decline over the past year.
ZBH sports a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Penumbra, sporting a Zacks Rank #1 at present, has an estimated growth rate of 64.1% for 2024. Penumbra shares have gained 152% compared with the industry’s 9.2% rise over the past year.
PEN’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 109.4%.
Hologic, carrying a Zacks Rank #2 (Buy) at present, has an earnings yield of 4.78% compared to the industry’s -7.07%. Shares of HOLX have risen 14% compared with the industry’s 9.2% growth over the past year.
Hologic’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 27.3%.