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Henry Schein (HSIC) Q2 Earnings Top, Operating Margin Dips
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Henry Schein, Inc. (HSIC - Free Report) registered adjusted earnings per share (EPS) of $1.31 in the second quarter of 2023, up 0.8% from the year-ago period’s adjusted EPS. The metric beat the Zacks Consensus Estimate by 4.8%.
Revenues in Detail
Henry Schein reported net sales of $3.1 billion in the second quarter, up 2.3% year over year. The metric missed the Zacks Consensus Estimate by 0.3%.
The year-over-year increase included a 0.2% internal decrease in local currencies, 2.9% growth from acquisitions and a 0.4% decline related to unfavorable foreign exchange.
Henry Schein, Inc. Price, Consensus and EPS Surprise
Sales of personal protective equipment (PPE) and COVID-19 test kits in the second quarter were $163 million, compared with $259 million in the prior-year period. Excluding sales of PPE and COVID-19 test kits, second-quarter internal sales growth in local currencies was 3.3% year over year.
On a geographic basis, the company recorded sales of $2.26 billion in North America, up 0.1% year over year. Sales totaled $838 million in the International market, up 8.7% year over year. Our model projected sales in North America and International sales to be $2.33 billion and $774.5 million, respectively.
Segmental Analysis
Henry Schein derives revenues from three operating segments — Dental, Medical and Technology and Value-added Services.
Dental
In the second quarter, the company recorded $1.96 billion in global Dental sales, up 5.6% year over year. This compares with our model’s projected year-over-year improvement of 4.6%.
The segment’s revenues included an internally generated sales increase of 2% in local currencies and 4.2% growth from acquisitions. The business registered a 0.6% decline related to foreign currency exchange.
Medical
Global Medical revenues declined 4.6% year over year to $950 million. Our model projected the segment’s revenues to decline 2.1%.
The segment’s revenues included an internally generated sales decline of 5.3% in local currencies, 0.8% growth from acquisitions and a 0.1% decline related to foreign currency exchange.
Technology and Value-Added Services
Revenues from global Technology and Value-added Services rose 6.6% to $193 million. Our model’s projection was a 6.2% improvement year over year.
The figure included 5.5% internal sales growth in local currencies, 1.5% growth from acquisitions and a 0.3% decline related to foreign currency exchange.
Margin Trend
In the reported quarter, the gross profit totaled $975 million, reflecting a 3.2% increase year over year. The gross margin expanded 26 basis points (bps) to 31.6%.
SG&A expenses rose 4% to $707 million in the quarter under review.
The adjusted operating profit in the second quarter was $268 million, an increase of 1.1% year over year. Meanwhile, the adjusted operating margin contracted 10 bps year over year to 8.6%.
Financial Position
Henry Schein exited the second quarter of 2023 with cash and cash equivalents of $137 million compared with $117 million as of Dec 31, 2022. The long-term debt of the company at the end of the second quarter was $1.13 billion compared with $1.04 billion at the end of 2022.
The cumulative net cash provided by operating activities at the end of the second quarter of 2023 was $274 million compared with $157 million in the year-ago period.
In the second quarter of 2023, HSIC repurchased nearly 638,000 shares of its common stock for $50 million. The company had approximately $365 million authorized and available for future stock repurchases at the end of the reported quarter.
2023 Guidance
Henry Schein reiterated its outlook for 2023, which considers the current continuing operations and recently announced acquisitions. The guidance also assumes that present foreign currency exchange rates will prevail, and end markets will remain consistent with current market conditions.
For 2023, the company expects adjusted EPS in the range of $5.18-$5.35 (unchanged). The Zacks Consensus Estimate for the metric is currently pegged at $5.26.
For 2023, Henry Schein expects sales growth of nearly 1%-3% compared with the 2022 figure (unchanged from the previous guidance). The Zacks Consensus Estimate for revenues is currently pegged at $12.83 billion.
Our Take
Henry Schein ended the second quarter of 2023 with an earnings beat and a revenue miss. On a positive note, the North American dental equipment business and dental consumable merchandise reported year-over-year sales growth. There was also a positive contribution from Technology and Value-added Services, implants, biomaterials and endodontic products.
The Dental business in North America reflected good patient traffic and continued investments in technology and equipment by dental practitioners. Advancements made in the BOLD+1 Strategic Plan buoy optimism, with more than $1 billion investments committed to acquisitions to date. The gross margin expansion in the quarter appears promising too.
Meanwhile, sales of PPE and COVID-19 test kits continued to post a decline in the quarter under review. Increased capital deployment for acquisitions has affected the quarter’s results more than in previous years.
Zacks Rank and Key Picks
Henry Schein currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the broader medical space that have announced quarterly results are Abbott Laboratories (ABT - Free Report) , Elevance Health, Inc. (ELV - Free Report) and Intuitive Surgical, Inc. (ISRG - Free Report) .
Abbott, carrying a Zacks Rank of 2 (Buy), reported a second-quarter 2023 adjusted EPS of $1.08, beating the Zacks Consensus Estimate by 3.8%. Revenues of $9.98 billion outpaced the consensus mark by 2.9%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Abbott has a long-term estimated growth rate of 5.1%. ABT’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 12.4%.
Elevance Health reported a second-quarter 2023 adjusted EPS of $9.04, beating the Zacks Consensus Estimate by 2.5%. Revenues of $43.38 billion surpassed the Zacks Consensus Estimate by 4.5%. It currently carries a Zacks Rank #2.
Elevance Health has a long-term estimated growth rate of 12.1%. ELV’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 2.8%.
Intuitive Surgical reported a second-quarter 2023 adjusted EPS of $1.42, beating the Zacks Consensus Estimate by 7.6%. Revenues of $1.76 billion surpassed the Zacks Consensus Estimate by 1.4%. It currently carries a Zacks Rank #2.
Intuitive Surgical has a long-term estimated growth rate of 14.5%. ISRG’s earnings surpassed estimates in three of the trailing four quarters and missed the same once, the average surprise being 4.2%.
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Henry Schein (HSIC) Q2 Earnings Top, Operating Margin Dips
Henry Schein, Inc. (HSIC - Free Report) registered adjusted earnings per share (EPS) of $1.31 in the second quarter of 2023, up 0.8% from the year-ago period’s adjusted EPS. The metric beat the Zacks Consensus Estimate by 4.8%.
Revenues in Detail
Henry Schein reported net sales of $3.1 billion in the second quarter, up 2.3% year over year. The metric missed the Zacks Consensus Estimate by 0.3%.
The year-over-year increase included a 0.2% internal decrease in local currencies, 2.9% growth from acquisitions and a 0.4% decline related to unfavorable foreign exchange.
Henry Schein, Inc. Price, Consensus and EPS Surprise
Henry Schein, Inc. price-consensus-eps-surprise-chart | Henry Schein, Inc. Quote
Sales of personal protective equipment (PPE) and COVID-19 test kits in the second quarter were $163 million, compared with $259 million in the prior-year period. Excluding sales of PPE and COVID-19 test kits, second-quarter internal sales growth in local currencies was 3.3% year over year.
On a geographic basis, the company recorded sales of $2.26 billion in North America, up 0.1% year over year. Sales totaled $838 million in the International market, up 8.7% year over year. Our model projected sales in North America and International sales to be $2.33 billion and $774.5 million, respectively.
Segmental Analysis
Henry Schein derives revenues from three operating segments — Dental, Medical and Technology and Value-added Services.
Dental
In the second quarter, the company recorded $1.96 billion in global Dental sales, up 5.6% year over year. This compares with our model’s projected year-over-year improvement of 4.6%.
The segment’s revenues included an internally generated sales increase of 2% in local currencies and 4.2% growth from acquisitions. The business registered a 0.6% decline related to foreign currency exchange.
Medical
Global Medical revenues declined 4.6% year over year to $950 million. Our model projected the segment’s revenues to decline 2.1%.
The segment’s revenues included an internally generated sales decline of 5.3% in local currencies, 0.8% growth from acquisitions and a 0.1% decline related to foreign currency exchange.
Technology and Value-Added Services
Revenues from global Technology and Value-added Services rose 6.6% to $193 million. Our model’s projection was a 6.2% improvement year over year.
The figure included 5.5% internal sales growth in local currencies, 1.5% growth from acquisitions and a 0.3% decline related to foreign currency exchange.
Margin Trend
In the reported quarter, the gross profit totaled $975 million, reflecting a 3.2% increase year over year. The gross margin expanded 26 basis points (bps) to 31.6%.
SG&A expenses rose 4% to $707 million in the quarter under review.
The adjusted operating profit in the second quarter was $268 million, an increase of 1.1% year over year. Meanwhile, the adjusted operating margin contracted 10 bps year over year to 8.6%.
Financial Position
Henry Schein exited the second quarter of 2023 with cash and cash equivalents of $137 million compared with $117 million as of Dec 31, 2022. The long-term debt of the company at the end of the second quarter was $1.13 billion compared with $1.04 billion at the end of 2022.
The cumulative net cash provided by operating activities at the end of the second quarter of 2023 was $274 million compared with $157 million in the year-ago period.
In the second quarter of 2023, HSIC repurchased nearly 638,000 shares of its common stock for $50 million. The company had approximately $365 million authorized and available for future stock repurchases at the end of the reported quarter.
2023 Guidance
Henry Schein reiterated its outlook for 2023, which considers the current continuing operations and recently announced acquisitions. The guidance also assumes that present foreign currency exchange rates will prevail, and end markets will remain consistent with current market conditions.
For 2023, the company expects adjusted EPS in the range of $5.18-$5.35 (unchanged). The Zacks Consensus Estimate for the metric is currently pegged at $5.26.
For 2023, Henry Schein expects sales growth of nearly 1%-3% compared with the 2022 figure (unchanged from the previous guidance). The Zacks Consensus Estimate for revenues is currently pegged at $12.83 billion.
Our Take
Henry Schein ended the second quarter of 2023 with an earnings beat and a revenue miss. On a positive note, the North American dental equipment business and dental consumable merchandise reported year-over-year sales growth. There was also a positive contribution from Technology and Value-added Services, implants, biomaterials and endodontic products.
The Dental business in North America reflected good patient traffic and continued investments in technology and equipment by dental practitioners. Advancements made in the BOLD+1 Strategic Plan buoy optimism, with more than $1 billion investments committed to acquisitions to date. The gross margin expansion in the quarter appears promising too.
Meanwhile, sales of PPE and COVID-19 test kits continued to post a decline in the quarter under review. Increased capital deployment for acquisitions has affected the quarter’s results more than in previous years.
Zacks Rank and Key Picks
Henry Schein currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the broader medical space that have announced quarterly results are Abbott Laboratories (ABT - Free Report) , Elevance Health, Inc. (ELV - Free Report) and Intuitive Surgical, Inc. (ISRG - Free Report) .
Abbott, carrying a Zacks Rank of 2 (Buy), reported a second-quarter 2023 adjusted EPS of $1.08, beating the Zacks Consensus Estimate by 3.8%. Revenues of $9.98 billion outpaced the consensus mark by 2.9%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Abbott has a long-term estimated growth rate of 5.1%. ABT’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 12.4%.
Elevance Health reported a second-quarter 2023 adjusted EPS of $9.04, beating the Zacks Consensus Estimate by 2.5%. Revenues of $43.38 billion surpassed the Zacks Consensus Estimate by 4.5%. It currently carries a Zacks Rank #2.
Elevance Health has a long-term estimated growth rate of 12.1%. ELV’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 2.8%.
Intuitive Surgical reported a second-quarter 2023 adjusted EPS of $1.42, beating the Zacks Consensus Estimate by 7.6%. Revenues of $1.76 billion surpassed the Zacks Consensus Estimate by 1.4%. It currently carries a Zacks Rank #2.
Intuitive Surgical has a long-term estimated growth rate of 14.5%. ISRG’s earnings surpassed estimates in three of the trailing four quarters and missed the same once, the average surprise being 4.2%.