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Is It Wise to Retain Henry Schein (HSIC) in Your Portfolio Now?
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Henry Schein, Inc. (HSIC - Free Report) is primed for growth in the upcoming quarters due to its expansion efforts through acquisitions and partnerships. The company’s innovative offerings in the growing global dental market also hold significant potential for long-term success. Also, its strategic placement of distribution centers worldwide gives a competitive edge in the industry.
Meanwhile, macroeconomic challenges and a tough competitive landscape remain concerns for the company.
In the past year, this Zacks Rank #3 (Hold) stock has fallen 20.7% compared with the 3.9% decline of the industry and the 24.9% rise of the S&P 500 composite.
The leading distributor of healthcare products and services has a market capitalization of $8.22 billion. Henry Schein surpassed estimates in two of the trailing four quarters, broke even in one quarter and missed in one, delivering an average earnings surprise of 2.55%.
Let’s delve deeper.
Tailwinds
Bolstering Growth Through Strategic Moves: Henry Schein’s robust acquisition strategy helps it pursue targets that provide access to additional product lines. In late December, the company entered into the extremity segment of the growing orthopedic market through an agreement to acquire a majority interest in TriMed and a strategic relationship with Extremity Medical. The addition of Shield Healthcare expands the company’s existing medical business with products like incontinence, urology, ostomy, enteral nutrition, advanced wound care and diabetes supplies.
Furthermore, Henry Schein acquired a majority share in Biotech Dental, which increased the prospect of offering a seamless digital workflow solution. The company also signed a definitive agreement to acquire S.I.N. Implant System, one of Brazil’s leading manufacturers of dental implants. The announcement marks Henry Schein’s planned entry into Brazil’s large implant market. Its broad global footprint has evolved, supported by the contributions of these strategic acquisitions.
Image Source: Zacks Investment Research
Dental Business Trends Support Long-Term Prospects: The $433.2 billion valued (as of 2022) global dental service market is expected to grow steadily in the next few years. Amid this, Henry Schein’s efforts to expand digital dentistry globally are encouraging. The company has its own cost-effective consumable merchandise products and manufactures certain dental specialty products in the areas of implants, orthodontics and endodontics.
Of late, the company is witnessing consistent demand for these implant systems and endodontic products and integrated software and services solutions. Further, Henry Schein is organically gaining shares in the Global Dental specialties market, with acquisitions leading to significant growth across oral surgical, endodontics and orthodontics product lines.
Throughout the first quarter, dental merchandise sales made steady improvement, while international merchandise sales also experienced a similar trend in most markets. The newly launched Easy 2.0 value implant system in Germany supported international sales growth.
Widespread Network and Channel Mix: Henry Schein has set up distribution centers worldwide to better serve customers and increase its operating efficiency. Apart from North America, the company’s presence spans Australia and New Zealand, as well as emerging nations like China, Brazil, Israel, the Czech Republic and Poland. The growth in the healthcare distribution industry is a positive sign for the business, indicating a growing awareness of the benefits of preventative care and oral hygiene. We believe Henry Schein’s worldwide reach is a major competitive advantage over other players in the industry.
Following last year's cyber incident, the dental and medical distribution businesses in North America and Europe have bounced back well. In the first quarter of 2024, the company’s Technology and Value-Added service sales grew 13.8% from the prior-year quarter’s levels. Sales growth in North America was primarily driven by value-added services, while international growth was driven by the Dental cloud-based solution.
Downsides
Macroeconomic Challenges: The global macroeconomic environment, including exchange rate fluctuations, inflation and recession, is affecting Henry Schein’s financial operations. Amid efforts by the governments and insurance companies to contain the rising healthcare costs, the company may struggle to keep in check its cost of revenues and operating expenses under these persistent macro challenges. In the first quarter, Henry Schein’s selling, general & administrative expenses rose 10.3% from the comparable 2023 figure.
Competitive Space: The U.S. healthcare products and service distribution industry is highly competitive and consists principally of national, regional and local distributors. In the North American dental products market, the company faces stiff competition from the Patterson Dental business of Patterson Companies Inc. and Benco Dental Supply. Henry Schein operates in a highly competitive medical product distribution market with larger players like McKesson Corp. The competitive landscape in the overseas market is also tough. The tussle for market share might be a drag on results.
Estimate Trend
The Zacks Consensus Estimate for HSIC’s 2024 earnings per share (EPS) has moved south 0.2% to $5.16 in the past 30 days.
The Zacks Consensus Estimate for the company’s 2024 revenues is pegged at $13.34 billion. This suggests an 8.1% rise from the year-ago reported number.
Hims & Hers Health’s earnings are expected to surge 281.8% in 2024 compared with the industry’s 15.7% growth. HIMS’ earnings surpassed estimates in three of the trailing four quarters and missed in one, delivering an average surprise of 79.2%. Its shares have surged 131% against the industry’s 27.1% decline in the past year.
Haemonetics, sporting a Zacks Rank #1 at present, has an estimated fiscal 2025 earnings growth rate of 15.4% compared with the industry’s 12.8%. Shares of HAE have dropped 45.3% against the industry’s 0.6% growth over the past year.
HAE’s earnings surpassed estimates in each of the trailing four quarters, delivering an average surprise of 13.2%. In the last reported quarter, it delivered an earnings surprise of 2.3%.
Medpace, carrying a Zacks Rank #2 (Buy) at present, has an estimated 2024 earnings growth rate of 27.1% compared with the industry’s 13.1%. Shares of MEDP have rallied 80.9% compared with the industry’s 5.2% growth over the past year.
MEDP’s earnings surpassed estimates in each of the trailing four quarters, delivering an average surprise of 12.8%. In the last reported quarter, it delivered an earnings surprise of 30.6%.
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Is It Wise to Retain Henry Schein (HSIC) in Your Portfolio Now?
Henry Schein, Inc. (HSIC - Free Report) is primed for growth in the upcoming quarters due to its expansion efforts through acquisitions and partnerships. The company’s innovative offerings in the growing global dental market also hold significant potential for long-term success. Also, its strategic placement of distribution centers worldwide gives a competitive edge in the industry.
Meanwhile, macroeconomic challenges and a tough competitive landscape remain concerns for the company.
In the past year, this Zacks Rank #3 (Hold) stock has fallen 20.7% compared with the 3.9% decline of the industry and the 24.9% rise of the S&P 500 composite.
The leading distributor of healthcare products and services has a market capitalization of $8.22 billion. Henry Schein surpassed estimates in two of the trailing four quarters, broke even in one quarter and missed in one, delivering an average earnings surprise of 2.55%.
Let’s delve deeper.
Tailwinds
Bolstering Growth Through Strategic Moves: Henry Schein’s robust acquisition strategy helps it pursue targets that provide access to additional product lines. In late December, the company entered into the extremity segment of the growing orthopedic market through an agreement to acquire a majority interest in TriMed and a strategic relationship with Extremity Medical. The addition of Shield Healthcare expands the company’s existing medical business with products like incontinence, urology, ostomy, enteral nutrition, advanced wound care and diabetes supplies.
Furthermore, Henry Schein acquired a majority share in Biotech Dental, which increased the prospect of offering a seamless digital workflow solution. The company also signed a definitive agreement to acquire S.I.N. Implant System, one of Brazil’s leading manufacturers of dental implants. The announcement marks Henry Schein’s planned entry into Brazil’s large implant market. Its broad global footprint has evolved, supported by the contributions of these strategic acquisitions.
Image Source: Zacks Investment Research
Dental Business Trends Support Long-Term Prospects: The $433.2 billion valued (as of 2022) global dental service market is expected to grow steadily in the next few years. Amid this, Henry Schein’s efforts to expand digital dentistry globally are encouraging. The company has its own cost-effective consumable merchandise products and manufactures certain dental specialty products in the areas of implants, orthodontics and endodontics.
Of late, the company is witnessing consistent demand for these implant systems and endodontic products and integrated software and services solutions. Further, Henry Schein is organically gaining shares in the Global Dental specialties market, with acquisitions leading to significant growth across oral surgical, endodontics and orthodontics product lines.
Throughout the first quarter, dental merchandise sales made steady improvement, while international merchandise sales also experienced a similar trend in most markets. The newly launched Easy 2.0 value implant system in Germany supported international sales growth.
Widespread Network and Channel Mix: Henry Schein has set up distribution centers worldwide to better serve customers and increase its operating efficiency. Apart from North America, the company’s presence spans Australia and New Zealand, as well as emerging nations like China, Brazil, Israel, the Czech Republic and Poland. The growth in the healthcare distribution industry is a positive sign for the business, indicating a growing awareness of the benefits of preventative care and oral hygiene. We believe Henry Schein’s worldwide reach is a major competitive advantage over other players in the industry.
Following last year's cyber incident, the dental and medical distribution businesses in North America and Europe have bounced back well. In the first quarter of 2024, the company’s Technology and Value-Added service sales grew 13.8% from the prior-year quarter’s levels. Sales growth in North America was primarily driven by value-added services, while international growth was driven by the Dental cloud-based solution.
Downsides
Macroeconomic Challenges: The global macroeconomic environment, including exchange rate fluctuations, inflation and recession, is affecting Henry Schein’s financial operations. Amid efforts by the governments and insurance companies to contain the rising healthcare costs, the company may struggle to keep in check its cost of revenues and operating expenses under these persistent macro challenges. In the first quarter, Henry Schein’s selling, general & administrative expenses rose 10.3% from the comparable 2023 figure.
Competitive Space: The U.S. healthcare products and service distribution industry is highly competitive and consists principally of national, regional and local distributors. In the North American dental products market, the company faces stiff competition from the Patterson Dental business of Patterson Companies Inc. and Benco Dental Supply. Henry Schein operates in a highly competitive medical product distribution market with larger players like McKesson Corp. The competitive landscape in the overseas market is also tough. The tussle for market share might be a drag on results.
Estimate Trend
The Zacks Consensus Estimate for HSIC’s 2024 earnings per share (EPS) has moved south 0.2% to $5.16 in the past 30 days.
The Zacks Consensus Estimate for the company’s 2024 revenues is pegged at $13.34 billion. This suggests an 8.1% rise from the year-ago reported number.
Key Picks
Some better-ranked stocks in the broader medical space are Hims & Hers Health (HIMS - Free Report) , Haemonetics (HAE - Free Report) and Medpace (MEDP - Free Report)
Hims & Hers Health’s earnings are expected to surge 281.8% in 2024 compared with the industry’s 15.7% growth. HIMS’ earnings surpassed estimates in three of the trailing four quarters and missed in one, delivering an average surprise of 79.2%. Its shares have surged 131% against the industry’s 27.1% decline in the past year.
HIMS sports a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Haemonetics, sporting a Zacks Rank #1 at present, has an estimated fiscal 2025 earnings growth rate of 15.4% compared with the industry’s 12.8%. Shares of HAE have dropped 45.3% against the industry’s 0.6% growth over the past year.
HAE’s earnings surpassed estimates in each of the trailing four quarters, delivering an average surprise of 13.2%. In the last reported quarter, it delivered an earnings surprise of 2.3%.
Medpace, carrying a Zacks Rank #2 (Buy) at present, has an estimated 2024 earnings growth rate of 27.1% compared with the industry’s 13.1%. Shares of MEDP have rallied 80.9% compared with the industry’s 5.2% growth over the past year.
MEDP’s earnings surpassed estimates in each of the trailing four quarters, delivering an average surprise of 12.8%. In the last reported quarter, it delivered an earnings surprise of 30.6%.