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Can Dental Growth Drive Henry Schein's (HSIC) Q1 Earnings?

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Henry Schein, Inc. (HSIC - Free Report) is scheduled to report first-quarter 2019 results on May 7, before the market opens. In the last reported quarter, the company’s earnings exceeded the Zacks Consensus Estimate by 0.9%. Overall, the metric surpassed estimates in three of the trailing four quarters, the average positive surprise being 2%.

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

Factors at Play

In the first quarter, Henry Schein is expected to demonstrate solid growth across all its segments, namely Dental, Medical and Technology plus Value-Added Services. Geographically, the company is gaining traction from all regions. We expect this trend to get reflected in the impending quarterly results.

Favorable Dental Business Trend: The company is currently making concerted efforts to expand in the field of digital dentistry, globally. In this regard, it is well-positioned to benefit from the ongoing phase of digitalization in the international dental market.Management seems to be encouraged by the positive feedback for the SLX Clear Aligner System from the Key Opinion Leaders and other market participants.

 

Henry Schein, Inc. Price and EPS Surprise

Henry Schein, Inc. Price and EPS Surprise

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

 

Further, in late 2018, the company announced investments in three implant companies, such as Intra-Lock, Medentis Medical and Pro-Cam Implants, which are expected to add high-margin digital treatment solutions to Henry Schein’s product offerings within this field.

We expect encouraging top-line contributions from the above developments in the yet-to-be-reported quarter.

Furthermore, we are upbeat about management’s expectations from the sustained dental equipment and consumables business growth in North America and other geographies. This bullish sentiment is likely to find place in the upcoming quarterly repoprt.

Evidently, the Zacks Consensus Estimate for North American dental revenues in the first quarter is pegged at $936 million, suggesting a 3.5% rise from the year-ago reported figure. The consensus estimate for first-quarter international Dental revenues stands at $668 million, implying 3.8% growth from the prior-year reported number.

Strong Technology and Value-Added Services Business: Henry Schein is steadily progressing with the array of product launches within this business. The company’s first-quarter performance is expected to benefit from the contribution of its joint venture (JV) with Internet Brands on dental technology that resulted in the formation of Henry Schein One. In recent times,Henry Schein One rolled out several key platform updates for patient engagement, patient financing and clinical decision support solutions. The unveiling of OmniCore, an all-in-one network infrastructure solution, is also projected to contribute to the company’s top line in the quarter under review.

Further, in late 2018, the company’s Dentrix Enterprise solutions along with Cerner solutions were selected for the contract with the Department of Veterinary Affairs as part of the project to modernize health care solutions for the military. This development should also favor the company’s top-line growth in the first quarter of 2019.

Growing Medical and Animal HealthBusiness: Henry Schein is consistently working to boost its Medical segment. Notably, worldwide Medical revenues rose 7.5% year over year in the fourth quarter. We expect to see another quarter of a strong organic uptick from the existing customer base and new patient traffic. The recent acquisition of North American Rescue, a leading provider of mission-critical medical products for the defense and Public Safety markets, is anticipated to expand the Medical portfolio further in the to-be-reported quarter.

Meanwhile, the company completed the spin-off of its global Animal Health business in February 2019. It is important to note that it will include the performance of the segment in first-quarter 2019 results.

What the Model Suggests

The proven Zacks model clearly shows that a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has higher chances of beating estimates if it also has a positive Earnings ESP. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Henry Schein has a Zacks Rank #4 (Sell) and an Earnings ESP of 0.00%, a combination that does not conclusively show an earnings beat for the stock.

The Zacks Consensus Estimate for earnings of 76 cents indicates a 20% decline from the year-earlier reported tally.

Stocks Worth a Look

Here are a few medical stocks worth considering as these have the right mix of elements to exceed expectations this reporting cycle.

Cardinal Health, Inc. (CAH - Free Report) has an Earnings ESP of +1.13% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

NanoString Technologies Inc. has an Earnings ESP of +3.08% and a Zacks Rank of 3.

Aurora Cannabis, Inc. (ACB - Free Report) has an Earnings ESP of +73.33% and is a Zacks #3 Ranked player.

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