A month has gone by since the last earnings report for Henry Schein (HSIC - Free Report) . Shares have added about 0.8% in that time frame, underperforming 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 the most recent earnings report in order to get a better handle on the important catalysts.
Henry Schein Q3 Earnings Top Estimates
Henry Schein, Inc. reported adjusted earnings per share (EPS) from continuing operations of 90 cents in the third quarter of 2019, up 15.4% year over year. Adjusted EPS beat the Zacks Consensus Estimate by 4.7% on revenue growth across each of its operating segments.
On a reported basis, EPS from continuing operations was 91 cents, showing a 54.2% improvement on a year-over-year basis.
Revenues in Detail
Henry Schein reported net sales of $2.51 billion in the third quarter, up 6.4% year over year. The metric missed the Zacks Consensus Estimate by 0.4%. The year-over-year improvement came on the back of 3.9% internal sales growth in local currencies along with acquisition growth of 3.7%. Unfavorable foreign currency exchange made a 1.1% impact on the top line.
Excluding $21.7 million in corporate revenues from product sales to Covetrus under the transition services agreement related to Henry Schein’s Animal Health spin-off, normalized internal sales growth in local currencies was 3%.
In the quarter under review, the company recorded sales of $1.86 billion in the North American market, up 5.7% year over year. Sales totaled $651.4 million in the international market, up 9%.
Henry Schein derives revenues from four operating segments: Dental, Medical and Technology and Value-added Services.
In the third quarter, the company derived $1.55 billion of global Dental sales, up 2.1% year over year. This includes 3.6% growth in local currencies and 1.5% adverse impact from foreign currency exchange. At local currencies, internally-generated sales increased 1.7% and acquisition growth was 1.9%.
Worldwide Medical revenues climbed 11.3% year over year to $803.7 million. Growth in local currencies was 11.4%, while there was a 0.1% decline owing to adverse foreign exchange.
Revenues from global Technology and Value-added Services grew 15.1% to $137.3 million. This included 15.8% growth in local currencies and 0.7% drop owing to adverse currency translation.
Gross profit increased 5.4% to $761.2 million in the reported quarter. Gross margin, however, contracted 33 basis points (bps) from the year-ago quarter to 30.3%. Adjusted operating income improved 9.4% year over year to $186.4 million. Adjusted operating margin expanded 20 bps to 7.4%.
The company exited third-quarter 2019 with cash and cash equivalents of $75.3 million compared with $84.9 million at the end of the second quarter. Year-to-date net cash provided by operating activities from continuing operations was $525.2 million compared with $269.4 million in the year-ago period.
During the quarter under review, Henry Schein repurchased 1.6 million shares of its common stock for approximately $98 million. At the end of the third quarter, the company had $75 million authorized for repurchase of common stock.
The company tightened its EPS guidance for 2019. It expects adjusted EPS in the range of $3.41 to $3.47(compared to earlier-provided range of $3.38-$3.50), reflecting 8-9% growth from 2018. The Zacks Consensus Estimate for 2019 adjusted EPS of $3.46 is within the guided range.
The company has also initiated its 2020 adjusted EPS guidance. It expects adjusted EPS from continuing operations within $3.65 to $3.75, reflecting growth of 6% to 9%. The Zacks Consensus Estimate for 2020 adjusted EPS of $3.75 is at the high end of the guided range.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates review. The consensus estimate has shifted -5.92% due to these changes.
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. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the top 40% 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.
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.