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Henry Schein Buys eVetPractice, Boosts Technology & VAS Arm

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Henry Schein, Inc. (HSIC - Free Report) recently completed the buyout of eVetPractice — a provider of cloud-based practice management solutions to veterinary clinics. Although the financial terms of the deal have been kept under wraps, the company expects the deal to prove accretive to its earnings per share post 2018.

Per the company, the eVetPractice will be a part of Henry Schein’s Veterinary Solutions portfolio which comprises AVImark and ImproMed in North America, as well as Vision, RxWorks and RoboVet globally. Notably, eVetPractice is a rapidly growing cloud solutions provider in the United States, with a customer base of around 900. We believe the latest takeover will widen Henry Schein’s customer base and portfolio.

Developments in Technology & VAS

In September, Henry Schein had announced the receipt of Office of the National Coordinator for Health Information Technology (ONC-Health IT) 2015 Edition Health IT Module Certification from Drummond Group LLC for its practice management and electronic health record software — MicroMD.
The company offers a wide range of practice management software systems covering dental, animal health and medical. It has a customer base of more than 95,000 practices, inclusive of MicroMD for physician practices.

Continuing with the slew of developments, the company had earlier announced a partnership between Medical Systems and Simplifeye. The combined entity aimed at creating a mobile experience by integration of Simplifeye with Henry Schein’s MicroMD. Furthermore, this collaboration aims at allowing physicians to provide more customized patient experiences, simplify their practice workflows and keep concerned team members well connected when away from their workplaces.

Performance of Technology and VAS

We believe this latest development will boost sales in the company’s global Technology and Value-added Services (VAS) business. Interestingly, this segment saw a 4.1% increase in revenues in the last reported quarter. This included 3.7% growth in local currencies and a 0.4% rise related to foreign currency exchange. Acquisitions contributed 0.7% in the quarter under review.

Market Potential

According to a report by MarketsandMarkets, the global veterinary software market is expected to reach a value of $368.7 million by 2019, at a CAGR of 5.6% during 2014 to 2019. Considering the substantial potential of the market, we believe the latest development is a strategic one.

Per the company, the increasing trend toward cost control has the potential to drive the demand for technology solutions. Going by another report from MarketsandMarkets, the global healthcare IT market is projected to reach a value of $280.25 billion at a CAGR of 15.9% in the 2016-2021 period.

We believe an ageing population, unhealthy lifestyle along with rising awareness and expenditure in healthcare will continue to drive growth in the healthcare IT market. This market is dominated by a number of well-established players, the NextGen division of Quality Systems, Inc. being a prominent one.

Share Price Performance

Over the past month, Henry Schein has been underperforming the broader industry. The stock has gained 3.9%, lower than the broader industry’s 4.5%. We believe this latest development will help the company to bounce back.

 

 

Zacks Rank & Key Picks

Henry Schein carries a Zacks Rank #4 (Sell).

A few better-ranked medical stocks are athenahealth, Inc. and Align Technology, Inc. (ALGN - Free Report) . Notably, athenahealth and Align Technology sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

athenahealth has a long-term expected earnings growth rate of 22.3%. The stock has rallied roughly 22.6% over a year.

Align Technology has a long-term expected earnings growth rate of 28.9%. The stock has gained 136.9% in a year.

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