It has been about a month since the last earnings report for Henry Schein (HSIC Quick QuoteHSIC - Free Report) . Shares have added about 6.4% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Henry Schein due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

HSIC Q3 Earnings Top, Margins Down

Henry Schein, Inc. registered adjusted earnings per share (EPS) of $1.22 in the third quarter of 2024, down 7.6% from the year-ago figure. However, the metric exceeded the Zacks Consensus Estimate by 5.2%.

Q3 Revenues in Detail

Henry Schein reported net sales of $3.17 billion, up a marginal 0.4% year over year. The metric lagged the Zacks Consensus Estimate by 2.2%. 

This reflects a 3.2% sales growth from acquisitions, a 0.2% sales decrease from unfavorable currency exchange, a 0.4% sales decrease from lower sales of personal protective equipment, primarily the result of lower glove pricing, and the slow pace of recovery from the cyber incident late last year.

On a geographic basis, the company recorded sales of $2.36 billion in North America, down 0.4% year over year. However, the figure missed our model’s projection of $2.39 billion.

Sales totaled $819 million in the International market, up 2.5% year over year. Our model’s projection for the metric was $852.7 million.  

Segmental Analysis

Henry Schein derives revenues from two operating segments — Health Care Distribution (includes the global Dental and Medical businesses) and Technology and Value-Added Services.

In the third quarter, the company recorded $1.85 billion in global Dental sales, down 1.6% year over year. This compares with our model’s projection of $1.9 billion.  

Global Medical revenues improved 2.9% year over year to $1.10 billion. Our model’s forecast for the metric was $1.10 billion. 

Revenues from global Technology and Value-Added Services rose 5.1% to $221 million. Our model’s projection for the metric was $225.9 million.

Margin Trend

In the reported quarter, the gross profit totaled $993 million, reflecting a 0.2% decrease year over year. The gross margin contracted 18 basis points (bps) to 31.3% due to a 0.6% rise in the cost of sales.

SG&A expenses declined 0.1% to $724 million in the quarter under review. The adjusted operating profit was $269 million compared with $270 million in the year-ago period. The adjusted operating margin contracted 6 bps year over year to 8.5%.

Liquidity Position

Henry Schein exited the third quarter with cash and cash equivalents of $126 million compared with $138 million at the end of the second quarter.  

Cumulative net cash provided by operating activities at the end of the third quarter was $644 million compared with the year-ago figure of $532 million.

During the reported quarter, HSIC repurchased nearly 2.0 million shares of its common stock at an average price of $69.09 per share for a total of approximately $135 million. The company had approximately $455 million authorized and available for future stock repurchases.

2024 Guidance

Henry Schein provided an updated financial outlook for 2024. 

The company expects adjusted EPS to be in the range of $4.74-$4.82 (previously $4.70-$4.82). The revised figure reflects 5-7% growth from the 2023 reported figure.  The Zacks Consensus Estimate for the metric is currently pegged at $4.74.

Henry Schein expects 2024 sales growth of nearly 4-5% (previously 4-6%) compared with the year-ago figure.  The Zacks Consensus Estimate for revenues is currently pegged at $12.90 billion.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates.

VGM Scores

At this time, Henry Schein has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Henry Schein has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

Performance of an Industry Player

Henry Schein is part of the Zacks Medical - Dental Supplies industry. Over the past month, Labcorp (LH Quick QuoteLH - Free Report) , a stock from the same industry, has gained 1.3%. The company reported its results for the quarter ended September 2024 more than a month ago.

Labcorp reported revenues of $3.28 billion in the last reported quarter, representing a year-over-year change of +7.4%. EPS of $3.50 for the same period compares with $3.38 a year ago.

Labcorp is expected to post earnings of $3.40 per share for the current quarter, representing a year-over-year change of +3%. Over the last 30 days, the Zacks Consensus Estimate has changed -0.6%.

The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Labcorp. Also, the stock has a VGM Score of D.