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Henry Schein (HSIC) Q2 Earnings Surpass, 2024 Guidance Slashed

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Henry Schein, Inc. (HSIC - Free Report) registered adjusted earnings per share (EPS) of $1.23 in the second quarter of 2024, down 6.1% from the year-ago period’s adjusted EPS. However, the metric exceeded the Zacks Consensus Estimate by 0.8%.

Revenues in Detail

Henry Schein reported net sales of $3.14 billion in the second quarter, up 1.2% year over year. The metric lagged the Zacks Consensus Estimate by 4.3%.

The year-over-year upside reflects an internal sales decline of 2.4%.

On a geographic basis, the company recorded sales of $2.29 billion in North America, up 1% year over year. However, this missed our model’s projected revenues of $2.38 billion.

Sales totaled $851 million in the International market, up 1.5% year over year. Our model projected sales to be $899.4 million.  

Segmental Analysis

Henry Schein derives revenues from two operating segments — Health Care Distribution (includes the global Dental and Medical businesses), and Technology and Value-Added Services.

Henry Schein, Inc. Price, Consensus and EPS Surprise

Henry Schein, Inc. Price, Consensus and EPS Surprise

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

In the second quarter, the company recorded $1.92 billion in global Dental sales, down 1.7% year over year. This compares with our model’s projection of $2 billion in sales.  

Global Medical revenues improved 5% year over year to $998 million. Our model forecast was $1.07 billion. 

Revenues from global Technology and Value-Added Services rose 10.8% to $214 million. Our model projected $209.4 million for this segment.

Margin Trend

In the reported quarter, the gross profit totaled $1.02 billion, reflecting a 4.4% increase year over year. The gross margin expanded 101 basis points (bps) to 32.5% due to a 0.3% fall in the cost of sales.

SG&A expenses rose 10.5% to $781 million in the quarter under review. The adjusted operating profit in the second quarter was $237 million compared with $268 million in the year-ago period. Meanwhile, the adjusted operating margin contracted 109 bps year over year to 7.6%.

Liquidity Position

Henry Schein exited the second quarter of 2024 with cash and cash equivalents of $138 million compared with $159 million at the end of the first quarter.  

Cumulative net cash provided by operating activities at the end of the second quarter was $493 million compared with the year-ago figure of $301 million.

During the quarter, HSIC repurchased nearly 1.4 million shares of its common stock at an average price of $70.64 per share for a total of approximately $100 million. The company had approximately $90 million authorized and available for future stock repurchases.

2024 Guidance

Henry Schein provided an updated financial outlook for 2024. The guidance assumes that present foreign currency exchange rates will generally prevail and end markets will remain consistent with current market conditions.

For 2024, the company expects adjusted EPS in the range of $4.70-$4.82 (previously $5.00-$5.16). The revised figure reflects 4%-7% growth from the 2023 reported figure.  The Zacks Consensus Estimate for the metric is currently pegged at $5.07.

Henry Schein expects 2024 sales growth of nearly 4%-6% (previously 8%-10%) compared with the reported figure in 2023.  The Zacks Consensus Estimate for revenues is currently pegged at $13.32 billion.

Our Take

Henry Schein closed the second quarter of 2024 with earnings beating estimates and revenues missing the same. Meanwhile, EPS also decreased on a year-over-year basis. The company provided dismal guidance for the full year, given the challenging economic environment in certain markets and the delay in recovery from the cyber incident. The adjusted operating margin also contracted during the quarter.

On a positive note, Henry Schein continued to experience improving sales trends in its distribution businesses. End markets remained stable, leading to a strong operating cash flow for the company. In addition, the gross margin improvement was driven by its strategies to expand high-growth, high-margin products and services, while the recent acquisitions also factored in.

In the same release, Henry Schein announced a restructuring plan to integrate recent acquisitions, right-size operations and further increase efficiencies, targeting $75 million to $100 million in annual run-rate savings. Also, an additional $500 million share repurchase program was authorized by the company’s board of directors on Jul 31, 2024.

Zacks Rank and Key Picks

Henry Schein currently carries a Zacks Rank #4 (Sell).

Some better-ranked stocks from the broader medical space are Intuitive Surgical (ISRG - Free Report) , Abbott Laboratories, Inc. (ABT - Free Report) and Quest Diagnostics (DGX - Free Report) .

Intuitive Surgical reported a third-quarter 2024 adjusted EPS of $1.78, which beat the Zacks Consensus Estimate by 16.3%. Revenues of $2.01 billion topped the consensus estimate by 2%. ISRG currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Intuitive Surgical has an estimated long-term earnings growth rate of 16.1% in 2024 compared with the industry’s 14.1%. The company’s earnings surpassed estimates in each of the trailing four quarters, the average being 8.97%.

Abbott, carrying a Zacks Rank #2 (Buy), reported third-quarter 2024 earnings of $1.14, which surpassed the Zacks Consensus Estimate by 3.6%. Revenues of $10.38 billion topped the Zacks Consensus Estimate by 0.3%. 

ABT has an estimated earnings growth rate of 10.1% for 2025 compared      with the S&P 500’s 9.3%. The company surpassed earnings estimates in each of the trailing four quarters, the average being 2.34%.

Quest Diagnostics, carrying a Zacks Rank #2, reported a third-quarter adjusted EPS of $2.35, which surpassed the Zacks Consensus Estimate by 1.7%. Revenues of $2.40 billion exceeded the Zacks Consensus Estimate by 0.5%.

DGX’s historical five-year earnings growth rate of 7.4% compared favorably with the industry’s 4.2%. The company surpassed earnings estimates in each of the trailing four quarters, the average being 3.31%.

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