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Henry Schein's Q3 Results Impress, Pricing Pressure a Drag
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On Dec 6, we issued an updated research report on Melville, NY-based Henry Schein Inc. (HSIC - Free Report) . The company is a leading global distributor of health care products and services. It serves office-based dental, medical and animal health practitioners, dental laboratories, government as well as institutional health care clinics and other alternate-care sites.
Over the past three months, the share price trend of Henry Schein was almost at par with the Zacks categorized Medical Product Market. However, the company’s trend picked up stream post third-quarter earnings. The stock is down 6%, which compares favorably with the negative return of 7.9% for the broader Medical product industry.
Adding to it is Henry Schein’s favorable estimate revision trend for the current year with one upward and no downward movement in the last 30 days. Henry Schein also recorded a five-year CAGR of 5.7% for revenues, reflecting strong fundamentals.
Also, the company is reported to have gained a strong share in both North American and overseas markets in the recently concluded quarter. Currently, Henry Schein’s distribution business boasts a wide global footprint with 61 distribution centers.
We are also optimistic about the company’s plan to acquire 80% ownership of Poland-based dental distributor – Marrodent. The deal is expected to help Henry Schein fortify its market position in the emerging dental markets in the region. Thus, we note that the company well positioned to gain from its extensive global foothold.
Henry Schein is also poised to benefit from several favorable market trends. One of the major positives is the domestic demographic trends, which are expected to drive utilization of dental and medical products distributed by the company. Factors like aging population and increasing healthcare expenditure across the globe will provide additional top-line opportunities.
Moreover, in the dental industry, a rise in oral health care expenditures is predicted. We believe that this will boost demand for Henry Schein’s products and services as well. Additionally, the company’s animal health business is gaining traction on the back of demand for animal health products in the U.S. Further, the company’s wide range of products hedges it from any substantial sales decline during an economic downturn. All these factors are expected to pave the way for Henry Schein to carve out its niche in the market.
Despite each segment’s strong sales growth, the company’s unchanged earnings guidance for 2016 in the third-quarter report was disappointing. The year-over-year decline in Henry Schein’s gross and operating margin due to higher cost of sales and expenses also raise concerns.
Also, some large integrated health care providers and group purchasing organizations (GPO) have gained considerable purchasing power of late. GPOs have also increased pricing pressure in the industry. This might be a drag on Henry Schein’s business in the future. Moreover, foreign currency fluctuations and stiff market competition continue to hinder the company’s business.
Zacks Rank & Key Picks
Henry Schein currently carries a Zacks Rank #3 (Hold). Some better-ranked medical stocks are NxStage Medical Inc. , Baxter International Inc. (BAX - Free Report) and Bovie Medical Corporation . NxStage Medical and Baxter International sport a Zacks Rank #1 (Strong Buy), while Bovie Medical carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
NxStage Medical surged 29.9% over the last one year compared with the S&P 500’s 9.5% over the same period. The company has a four-quarter average positive earnings surprise of 46.3%.
Baxter International rallied 23.9% over one year, much higher than the S&P 500. It has a trailing four-quarter average positive earnings surprise of 27%.
Bovie Medical recorded a 119.4% gain in the past one year, way better than the S&P 500’s 5.9%. The company has a trailing four-quarter positive average earnings surprise of 28.7%.
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Henry Schein's Q3 Results Impress, Pricing Pressure a Drag
On Dec 6, we issued an updated research report on Melville, NY-based Henry Schein Inc. (HSIC - Free Report) . The company is a leading global distributor of health care products and services. It serves office-based dental, medical and animal health practitioners, dental laboratories, government as well as institutional health care clinics and other alternate-care sites.
Over the past three months, the share price trend of Henry Schein was almost at par with the Zacks categorized Medical Product Market. However, the company’s trend picked up stream post third-quarter earnings. The stock is down 6%, which compares favorably with the negative return of 7.9% for the broader Medical product industry.
Adding to it is Henry Schein’s favorable estimate revision trend for the current year with one upward and no downward movement in the last 30 days. Henry Schein also recorded a five-year CAGR of 5.7% for revenues, reflecting strong fundamentals.
Also, the company is reported to have gained a strong share in both North American and overseas markets in the recently concluded quarter. Currently, Henry Schein’s distribution business boasts a wide global footprint with 61 distribution centers.
We are also optimistic about the company’s plan to acquire 80% ownership of Poland-based dental distributor – Marrodent. The deal is expected to help Henry Schein fortify its market position in the emerging dental markets in the region. Thus, we note that the company well positioned to gain from its extensive global foothold.
Henry Schein is also poised to benefit from several favorable market trends. One of the major positives is the domestic demographic trends, which are expected to drive utilization of dental and medical products distributed by the company. Factors like aging population and increasing healthcare expenditure across the globe will provide additional top-line opportunities.
Moreover, in the dental industry, a rise in oral health care expenditures is predicted. We believe that this will boost demand for Henry Schein’s products and services as well. Additionally, the company’s animal health business is gaining traction on the back of demand for animal health products in the U.S. Further, the company’s wide range of products hedges it from any substantial sales decline during an economic downturn. All these factors are expected to pave the way for Henry Schein to carve out its niche in the market.
Despite each segment’s strong sales growth, the company’s unchanged earnings guidance for 2016 in the third-quarter report was disappointing. The year-over-year decline in Henry Schein’s gross and operating margin due to higher cost of sales and expenses also raise concerns.
Also, some large integrated health care providers and group purchasing organizations (GPO) have gained considerable purchasing power of late. GPOs have also increased pricing pressure in the industry. This might be a drag on Henry Schein’s business in the future. Moreover, foreign currency fluctuations and stiff market competition continue to hinder the company’s business.
Zacks Rank & Key Picks
Henry Schein currently carries a Zacks Rank #3 (Hold). Some better-ranked medical stocks are NxStage Medical Inc. , Baxter International Inc. (BAX - Free Report) and Bovie Medical Corporation . NxStage Medical and Baxter International sport a Zacks Rank #1 (Strong Buy), while Bovie Medical carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
NxStage Medical surged 29.9% over the last one year compared with the S&P 500’s 9.5% over the same period. The company has a four-quarter average positive earnings surprise of 46.3%.
Baxter International rallied 23.9% over one year, much higher than the S&P 500. It has a trailing four-quarter average positive earnings surprise of 27%.
Bovie Medical recorded a 119.4% gain in the past one year, way better than the S&P 500’s 5.9%. The company has a trailing four-quarter positive average earnings surprise of 28.7%.
Zacks’ Best Private Investment Ideas
In addition to the recommendations that are available to the public on our website, how would you like to follow all Zacks' private buys and sells in real time?
Our experts cover all kinds of trades… from value to momentum . . . from stocks under $10 to ETF and option moves . . . from stocks that corporate insiders are buying up to companies that are about to report positive earnings surprises. You can even look inside exclusive portfolios that are normally closed to new investors. Starting today, for the next month, you can have unrestricted access. Click here for Zacks' private trades >>