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Here's Why You Should Add Henry Schein (HSIC) to Your Portfolio
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Henry Schein, Inc. (HSIC - Free Report) is well poised for growth in the coming quarters, backed by favorable dental business trends and a diverse channel mix. The market is optimistic about the stock given robust performances by all three of Henry Schein’s operating businesses: Dental, Medical, and Technology and Value-Added Services. However, economic problems and a stiff competitive landscape are concerning.
Over the past year, this Zacks Rank #2 (Buy) stock has gained 14.6% compared with 25.5% growth of the industry and 36.4% rise of the S&P 500 composite.
The renowned global distributor of health care products and services has a market capitalization of $10.72 billion.
Over the past five years, the company’s growth declined 0.2% against the industry’s 10.6% rise and the S&P 500’s 2.8% increase. The long-term expected growth rate is estimated at 13.9% compared with the industry’s growth projection of 14%.
Image Source: Zacks Investment Research
Per our Style Score, Henry Schein has Growth Score of A, which is reflective of the company’s solid prospects. Our research shows that stocks with a Growth Style Score of A or B combined with a Zacks Rank #1 (Strong Buy) or 2 offer the best upside potential.
Let’s delve deeper.
Key Drivers
Q2 Upsides: Henry Schein exited the second quarter of 2021 on an extremely bullish note with better-than-expected results despite pandemic adversities. Its second-quarter 2021 earnings surpassed the Zacks Consensus Estimate by 16.84%. Expansion of both margins buoys optimism for the stock. Rise in gross profit bodes well. The raised 2021 guidance for adjusted earnings per share from continuing operations is indicative that this growth momentum will continue through the rest of the year.
Dental Business Trends Favorable for Long Term: We are optimistic about Henry Schein’s strategy to expand digital dentistry globally. During the second quarter, Henry Schein’s global dental sales increased 102.9% from the year-ago period. Global dental specialties revenues in the second quarter registered internal growth of 91% in local currency versus the prior year. Henry Schein noted that growth was strong in each of the dental specialty categories, including implants, oral surgery, endodontics, and orthodontics, in the reported quarter. At present, the company is focusing on offering a diversified portfolio for the dental business and value-added services along with a favorable end market.
Henry Schein One Holds Potential: We are upbeat about Henry Schein’s dental technology joint venture Henry Schein One which reported record-high revenues during second-quarter 2021 and is the largest sales contributor to the company’s Technology and Value-Added Service business. The company saw solid growth across the business with the Dentrix Enterprise, Dentrix Ascend, Demandforce and DentalPlans.com solutions. The recent additions to the Henry Schein One portfolio, including a new software module and Dentrix Imaging, buoy optimism.
Strong Solvency Position: Henry Schein exited the second quarter of 2021 with cash and cash equivalents of $167.2 million compared with $144.5 million at the end of first-quarter 2021. Long-term debt for the company at the end of the second quarter of 2021 was $706.5 million. This figure is much higher than the second quarter’s cash and cash equivalent level. However, the company had no short-term debt on its balance sheet at the end of second-quarter 2021, which is indicative of a solid solvency position.
Downsides
Contagion of Economic Problems: The current macroeconomic environment across the globe has affected Henry Schein’s financial operations. Governments and insurance companies continue to look for ways to contain the rising cost of healthcare. This might build pressure on players in the healthcare industry, with Henry Schein being no exception.
Competitive Landscape: Henry Schein faces stiff competition from Patterson Dental business of Patterson Companies Inc. and Benco Dental Supply in the North American dental products market. The competition in the fast-growing animal health market is also fierce with med-tech bigwigs like IDEXX Laboratories (IDXX - Free Report) gaining traction. Moreover, the company is faced with a tough competitive landscape overseas.
Estimate Trend
Henry Schein has been witnessing a positive estimate revision trend for 2021. Over the past 90 days, the Zacks Consensus Estimate for its earnings has moved 5.9% north to $4.14.
The Zacks Consensus Estimate for third-quarter 2021 revenues is pegged at $2.89 billion, suggesting a 1.67% rise from the year-ago reported number.
Image: Bigstock
Here's Why You Should Add Henry Schein (HSIC) to Your Portfolio
Henry Schein, Inc. (HSIC - Free Report) is well poised for growth in the coming quarters, backed by favorable dental business trends and a diverse channel mix. The market is optimistic about the stock given robust performances by all three of Henry Schein’s operating businesses: Dental, Medical, and Technology and Value-Added Services. However, economic problems and a stiff competitive landscape are concerning.
Over the past year, this Zacks Rank #2 (Buy) stock has gained 14.6% compared with 25.5% growth of the industry and 36.4% rise of the S&P 500 composite.
The renowned global distributor of health care products and services has a market capitalization of $10.72 billion.
Over the past five years, the company’s growth declined 0.2% against the industry’s 10.6% rise and the S&P 500’s 2.8% increase. The long-term expected growth rate is estimated at 13.9% compared with the industry’s growth projection of 14%.
Image Source: Zacks Investment Research
Per our Style Score, Henry Schein has Growth Score of A, which is reflective of the company’s solid prospects. Our research shows that stocks with a Growth Style Score of A or B combined with a Zacks Rank #1 (Strong Buy) or 2 offer the best upside potential.
Let’s delve deeper.
Key Drivers
Q2 Upsides: Henry Schein exited the second quarter of 2021 on an extremely bullish note with better-than-expected results despite pandemic adversities. Its second-quarter 2021 earnings surpassed the Zacks Consensus Estimate by 16.84%. Expansion of both margins buoys optimism for the stock. Rise in gross profit bodes well. The raised 2021 guidance for adjusted earnings per share from continuing operations is indicative that this growth momentum will continue through the rest of the year.
Dental Business Trends Favorable for Long Term: We are optimistic about Henry Schein’s strategy to expand digital dentistry globally. During the second quarter, Henry Schein’s global dental sales increased 102.9% from the year-ago period. Global dental specialties revenues in the second quarter registered internal growth of 91% in local currency versus the prior year. Henry Schein noted that growth was strong in each of the dental specialty categories, including implants, oral surgery, endodontics, and orthodontics, in the reported quarter. At present, the company is focusing on offering a diversified portfolio for the dental business and value-added services along with a favorable end market.
Henry Schein One Holds Potential: We are upbeat about Henry Schein’s dental technology joint venture Henry Schein One which reported record-high revenues during second-quarter 2021 and is the largest sales contributor to the company’s Technology and Value-Added Service business. The company saw solid growth across the business with the Dentrix Enterprise, Dentrix Ascend, Demandforce and DentalPlans.com solutions. The recent additions to the Henry Schein One portfolio, including a new software module and Dentrix Imaging, buoy optimism.
Strong Solvency Position: Henry Schein exited the second quarter of 2021 with cash and cash equivalents of $167.2 million compared with $144.5 million at the end of first-quarter 2021. Long-term debt for the company at the end of the second quarter of 2021 was $706.5 million. This figure is much higher than the second quarter’s cash and cash equivalent level. However, the company had no short-term debt on its balance sheet at the end of second-quarter 2021, which is indicative of a solid solvency position.
Downsides
Contagion of Economic Problems: The current macroeconomic environment across the globe has affected Henry Schein’s financial operations. Governments and insurance companies continue to look for ways to contain the rising cost of healthcare. This might build pressure on players in the healthcare industry, with Henry Schein being no exception.
Competitive Landscape: Henry Schein faces stiff competition from Patterson Dental business of Patterson Companies Inc. and Benco Dental Supply in the North American dental products market. The competition in the fast-growing animal health market is also fierce with med-tech bigwigs like IDEXX Laboratories (IDXX - Free Report) gaining traction. Moreover, the company is faced with a tough competitive landscape overseas.
Estimate Trend
Henry Schein has been witnessing a positive estimate revision trend for 2021. Over the past 90 days, the Zacks Consensus Estimate for its earnings has moved 5.9% north to $4.14.
The Zacks Consensus Estimate for third-quarter 2021 revenues is pegged at $2.89 billion, suggesting a 1.67% rise from the year-ago reported number.
Key Picks
A few better-ranked stocks from the broader medical space include ResMed Inc. (RMD - Free Report) and West Pharmaceutical Services, Inc. (WST - Free Report) , each sporting a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
ResMed has a long-term earnings growth rate of 13.9%.
West Pharmaceutical has a long-term earnings growth rate of 28.4%.