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Can Dental Growth Drive Henry Schein's (HSIC) Q4 Earnings?

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Henry Schein, Inc. HSIC is scheduled to report fourth-quarter 2019 results on Feb 20, before market open. In the last reported quarter, the company’s earnings beat the Zacks Consensus Estimate by 4.7%. Overall, the metric surpassed estimates in the trailing four quarters, with the average surprise being 3%.

Let’s see how things have shaped up prior to this announcement.

Factors to Note

In the fourth quarter, Henry Schein is expected to have witnessed solid growth across all segments, namely Dental, Medical and Technology plus Value-Added Services, banking on strong market expansion across all geographies.

Favorable Dental Business Trend: The company has been making concerted efforts to expand in the field of digital dentistry globally. It is well positioned to once again benefit from digitalization in the international dental market in the fourth quarter.

Within North America, the company has been witnessing strong sales of dental specialty products. Internationally, CAD/CAM equipment sales registered solid growth during the last reported quarter. This trend is expected to have continued in the fourth quarter.

Henry Schein, Inc. Price and EPS Surprise


Henry Schein, Inc. Price and EPS Surprise

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

The previously-closed acquisitions of Hayes Handpiece franchise and Cliniclands are expected to have contributed to the dental business revenue growth in the fourth quarter.

Strong market adoption of the Primescan system in Europe and the United States is expected to have contributed to the company’s top line during the to-be-reported quarter.

The Zacks Consensus Estimate for fourth-quarter North American dental revenues is pegged at $1.07 billion, suggesting a 2.9% rise from the year-ago reported figure. The consensus estimate for international Dental revenues is pegged at $734 million, implying 15% growth from the prior-year reported number.

Strong Technology and Value-Added Services Business: Henry Schein is steadily progressing with an array of product launches within this business. The company’s fourth-quarter performance is expected to have benefited from consistent contribution of its joint venture (JV) with Internet Brands on dental technology that resulted in the formation of Henry Schein One. In recent months, Henry Schein One rolled out several key platform updates for patient engagement, patient financing and clinical decision support solutions, which are projected to have contributed to the company’s top line in the fourth quarter.

Further, the previously-closed acquisitions of Elite Computer Italia and Lighthouse are expected to have driven this business segment in the fourth quarter.

Growing Medical Business: Henry Schein is consistently working to boost the Medical segment. Its worldwide Medical revenues rose 11.3% year over year in the last reported quarter. The company is expected to have recorded strong organic growth from the existing customer base and growing new patient traffic. The acquisition of North American Rescue, a leading provider of mission-critical medical products for the defense and Public Safety markets, is expected to have contributed to the top line during the fourth quarter.

The company completed the spin-off of the global Animal Health business in February 2019, which might have impacted the segment’s fourth-quarter 2019 performance.

Q4 Projections

For fourth-quarter 2019, the Zacks Consensus Estimate for total revenues of $2.64 billion implies a decline of 21.8% from the prior-year reported figure. Also, the consensus estimate for earnings is pegged at 91 cents, indicating fall of 18.8% from the prior-year reported figure.

Earnings Whispers

Per our proven model, a stock needs to have a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) to deliver a positive earnings surprise. That is not the case here as you will see below.

Earnings ESP: Henry Schein has an Earnings ESP of 0.0%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: The company currently carries a Zacks Rank #3.

Stocks Worth a Look

Here are a few medical stocks worth considering from the same space that have the right mix of elements to deliver an earnings beat in the upcoming releases. You can see the complete list of today’s Zacks #1 Rank stocks here.

Tandem Diabetes Care, Inc. TNDM has a Zacks Rank #1 and an Earnings ESP of +86.44%.

Nevro Corp. NVRO is a Zacks #3 Ranked stock and has an Earnings ESP of +3.45%.

DexCom (DXCM - Free Report) has an Earnings ESP of +12.27% and a Zacks Rank #3.

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