Henry Schein, Inc. (HSIC Quick QuoteHSIC - Free Report) is scheduled to report its second-quarter 2016 financial numbers on Aug 4, before the opening bell.

Last quarter, this renowned healthcare products and services distributor posted a positive earnings surprise of 1.44%. Encouragingly, Henry Schein’s earnings surpassed the Zacks Consensus Estimate in 3 of the past 4 quarters, with an average beat of 2.03%.

Let’s see how things are shaping up prior to this announcement.

Factors at Play

Henry Schein is recognized for its unique strategy to expand business through niche acquisitions. It closed its first-quarter 2016 accounts with an agreement to buy 50% stakes in dental equipment manufacturer – J. Morita’s Japanese subsidiary – One Piece Corp.

This buyout is expected to strengthen Henry Schein's position in the Asian dental products markets. Notably the company entered the concerned market seven years ago with strategic partnerships in Hong Kong and later Thailand and China. With the recent completion of this deal in late Jun 2016, there are reasonable expectations from this transaction, which are forecasted at the very least to show in the form of Henry Schein’s raised revenue growth in the upcoming second quarter results, especially for the Asia-Pacific dental segment.

In terms of Henry Schein’s stock repurchase strategy exhibiting the company’s strong cash reserve, management made repurchases worth $100 million in the first quarter and was left with approximately $300 million authorized for future repurchases of its common stock. We believe the company will continue with the similar trend which will be evident in its second-quarter results.

Further, management remains highly optimistic about the company’s ability to win new customers in the medical space. In particular, following the recent amalgamation of the company’s physician business with that of Cardinal Health, management has been receiving positive feedback from the customers. Going forward, management expects to witness further expansion in Henry Schein’s market share within the non-acute care space, on account of this merger, in the second-quarter and beyond.

On the flip side, the company has been facing high restructuring costs over the past few quarters. Management expects Henry Schein to record similar high restructuring costs in second-quarter 2016, as well. Moreover, headwinds in the form of increased competition in the medical product distribution market as well as market uncertainties continue to be concerns.

Earnings Whispers

Our proven model does not conclusively show that Henry Schein is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here as you will see below.

Zacks ESP:  Henry Schein has an Earnings ESP of 0.00%. That is because both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at $1.62.

Zacks Rank: Henry Schein has a Zacks Rank #3 which increases the predictive power of ESP. However, an ESP of 0.00% makes surprise prediction difficult.

We caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Here are some companies you may want to consider as our proven model shows they have the right combination of elements to post an earnings beat in the upcoming quarter: 

Bristol-Myers Squibb Company (BMY Quick QuoteBMY - Free Report) , earnings ESP of +1.49% and a Zacks Rank #1.

Hologic Inc. (HOLX Quick QuoteHOLX - Free Report) , earnings ESP of +2.13% and a Zacks Rank #2.

Zimmer Biomet Holdings, Inc. (ZBH Quick QuoteZBH - Free Report) , earnings ESP of +1.02% and a Zacks Rank #2.

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