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Henry Schein (HSIC) Gears Up for Q1 Earnings: Factors to Note

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Henry Schein, Inc. (HSIC - Free Report) is expected to release first-quarter 2024 results on May 7 before the opening bell.

The company posted adjusted earnings per share (EPS) of 66 cents in the last reported quarter, which missed the Zacks Consensus Estimate by 5.71%. In the trailing four quarters, Henry Schein’s earnings matched estimates once, surpassed once and missed in two quarters. The average negative surprise is 0.83%.

Let’s see how things have shaped up prior to this announcement.

Factors at Play

Health Care Distribution

The October 2023 cybersecurity incident caused major disruptions to Henry Schein’s key dental and medical distribution businesses in North America and Europe, adversely impacting financial results for both the fourth quarter and full-year 2023. Merchandise sales within these operations were reported to have dropped below pre-cybersecurity incident levels. The company noted that, in 2024, it expects to see certain short-term residual impacts from the cybersecurity incident on its business. Accordingly, we assume that HSIC’s first-quarter 2024 operational results may reflect the lingering effects of the incident.

On a positive note, Henry Schein’s distribution businesses recovered well in the second half of the fourth quarter of 2023. This momentum is likely to have continued in the to-be-reported quarter, driven by the company’s durable customer loyalty and strong relationships forged by its field sales consultants, telesales representatives and service technicians with customers worldwide.

Additionally, Henry Schein’s effective direct marketing and customer care capabilities, including a robust e-commerce presence on social media, may have also contributed to the trend. These sales and marketing programs are likely to have helped the company diminish the residual impacts of the cybersecurity incident.

Henry Schein, Inc. Price and EPS Surprise

Henry Schein, Inc. Price and EPS Surprise

Henry Schein, Inc. price-eps-surprise | Henry Schein, Inc. Quote

In the first quarter of 2024, the medical business within Health Care Distribution is likely to have witnessed strong point-of-care diagnostic sales, reflecting the effect on patient traffic from last year’s flu season. Henry Schein's international markets may have also remained stable and consistent with the fourth quarter of 2023.

Because of the cybersecurity incident, there was a decline in sales of both traditional and digital dental equipment, leading the company to redeploy its field sales consultants as well as equipment sales specialists to focus on addressing immediate customer needs over new equipment orders. Those sales shifted to the first quarter of 2024 are likely to have been realized, benefiting HSIC’s top line.

Furthermore, the strong demand for intraoral scanners is expected to have continued in the to-be-reported quarter. Sales of equipment may have been boosted by the investment plans of numerous DSO (Dental Service Organisations) customers of HSIC. We also expect that robust growth in Henry Schein’s global equipment technical services may have positively benefited the quarter’s top line. The company regards its technical services capability as a strategic advantage, delivering remarkable response times and high-quality service to customers globally.

Henry Schein's Global Dental specialty products are expected to continue capturing market share in implants and biomaterials worldwide, driven by both acquisitions and internal growth. The company is likely to have achieved substantial growth in the European, Latin American and Asian markets, mainly from the Biotech acquisition in France and the S.I.N. acquisition in Brazil. In addition, the leading BioHorizons Camlog brands may have outpaced market share growth in Europe, primarily in Germany. All these trends are expected to benefit Henry Schein’s top line in the to-be-reported quarter.

Apart from the cybersecurity incident, the late flu season also negatively impacted point-of-care diagnostic sales and patient visits within Henry Schein’s medical business in Q4 2023. However, the same factor may have driven increasing sales in the to-be-reported quarter. The company’s new homecare platform is likely to have driven robust sales, given the segment is growing faster than the overall healthcare market.

Moreover, transactions such as acquiring a majority interest in TriMed and a strategic partnership with Extremity Medical LLC, which marked HSIC’s entry into the extremity segment of the orthopedic market, are likely to have positively impacted its top-line performance in the first quarter of 2024.

Our model projects the segment’s revenues to improve 5.3% year over year in the first quarter of 2024.

Technology and Value-Added Services

The remarkable sales growth within this business has been consistently driven by its largest component, Henry Schein One, mainly due to the Dentrix Ascend and Dentally cloud-based solutions. We expect this trend to have followed in the first quarter of 2024 as well. Most of its core products, including practice management software, revenue cycle management, analytics and AI solutions, are likely to have witnessed robust gains.

In addition, the customer base of cloud solutions may have continued to expand following Henry Schein’s introduction of several digital clinical workflow solutions, including AI technologies, to provide highly effective diagnostic solutions. Product enhancements launched in the past year, including remote scheduling and payments, are also likely to have contributed to growth. All these factors are expected to be positively reflected in Henry Schein’s 2024 first-quarter performance, thus benefiting revenues.

Our model projects HSIC’s global Technology and value-added services revenues to improve 5.8% compared to last year’s comparable period.

Furthermore, we also assume Henry Schein to have made remarkable progress in terms of the 2022-2024 BOLD+1 strategic plan. The company invested nearly $1 billion in support of the initiative and may have moved closer toward achieving its goal of deriving 40% of its operating income from the sales of high-growth, high-margin products and services, thereby enhancing 2024 first-quarter revenues.

Q1 Estimates

The Zacks Consensus Estimate for HSIC’s first-quarter 2024 revenues is pegged at $3.23 billion. This suggests an increase of 5.5% from the year-ago reported figure.

The Zacks Consensus Estimate for its first-quarter 2024 EPS stands at 99 cents, which indicates a year-over-year fall of 18.2%.

What Our Model Suggests

Per our proven model, a stock with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold), along with a positive Earnings ESP, has a higher chance of beating estimates, which is not the case here.

Earnings ESP: Henry Schein has an Earnings ESP of 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: The company currently carries a Zacks Rank #3.

Stocks Worth a Look

Here are some medical stocks worth considering as these have the right combination of elements to post an earnings beat this quarter:

TransMedics Group (TMDX - Free Report) has an Earnings ESP of +240.00% and a Zacks Rank #1. The company is expected to release first-quarter 2024 results on May 6. You can see the complete list of today’s Zacks #1 Rank stocks here.

TransMedics has an expected earnings growth rate of 81.8% for 2024. TMDX surpassed earnings in each of the trailing four quarters, the average being 107.83%.

Sarepta Therapeutics (SRPT - Free Report) has an Earnings ESP of +123.86% and a Zacks Rank #2. The company is expected to release first-quarter 2024 results on May 7.

SRPT has an expected earnings growth rate of 136.7% for 2024 compared to the industry’s 13.3%. The company surpassed earnings in each of the trailing four quarters, the average being 464.56%.

Insulet (PODD - Free Report) currently has an Earnings ESP of +11.11% and a Zacks Rank #2. The company is set to release its first-quarter 2024 results on May 9.

PODD has an expected long-term earnings growth rate of 18.1% compared to the industry’s 11.4%. The company surpassed earnings in each of the trailing four quarters, the average being 100.09%.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.

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