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Henry Schein (HSIC) Grows Inorganically, Closes JV, Buys Stake

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Zacks Equity Research
·4 min read
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Henry Schein HSIC has started the year with two back-to-back inorganic growth updates. The company recently completed the joint venture (JV) with Casa Schmidt, a dental solution provider with network in Spain and Portugal. Simultaneously, the company announced the buyout of a majority ownership position in Prism Medical Products, LLC (PRISM), a U.S.-based player in the field of specialty home medical supplies.

Shares of the company rose 1.9% to close at $67.78 yesterday, following the announcements.

Financial terms of the both the deals were not disclosed. Together the developments are expected to strengthen the company’s presence in high potential markets.

The Developments and Their Importance at a Glance

Per the JV deal with Casa Schmidt, Henry Schein will have majority ownership and will operate in Spain and Portugal under ‘Henry Schein’ name. Apart from Henry Schein’s comprehensive line of dental business, the JV will also add Casa Schmidt’s lines of business including Schmidt Dental Solutions (a full-service distributor of dental products and services), Servimed (technical support to dental practitioners and dental specialists) and Importación Dental Especialidades (a supplier of specialized implantology and orthodontics products and services).

 

Apart from expanding its international presence in dental space, the JV is also expected to complement Henry Schein’s dental practice management software company Henry Schein One’s practice management and patient communication software, as well as the comprehensive implant systems, digital workflows and regenerative solutions offered by CAMLOG and BioHorizons.

Meanwhile, with its Prism Medical Products acquisition, Henry Schein has forayed into the multibillion-dollar home medical equipment and supplies market. Further, PRISM’s broad referral network of nationally affiliated and independently operated wound care clinics will help Henry Schein to strengthen its position in the wound care management market, which is growing at an accelerated pace.

This new addition will operate as a subsidiary of the company’s U.S. medical division, Henry Schein Medical.

North Carolina-based PRISM generated net revenues of $52 million in its last fiscal (ended Sep 30, 2020). The integration of PRISM is expected to be neutral to Henry Schein's 2021 EPS and accretive thereafter.

Although under the current pandemic situation, expanding into the home health market is the need of the hour, Henry Schein stated that this has been part of its long-standing strategic goal. The company expects this acquisition to enable it to work more closely with patients while strengthening relationships with physicians who prescribe home medical supplies.

Henry Schein's Recent Inorganic Expansions

We note that Henry Schein’s revenue growth has been consistently supported by niche acquisitions and partnerships. Its robust acquisition strategy helps it to pursue targets that provide access to additional product lines.

The company, in September, entered into an agreement with Zyris, Inc. to become the exclusive distributor of the latter’s complete dental isolation system. In the same month, the company announced that it is currently offering TeleDent by MouthWatch, which is a tele-dentistry and patient-engagement platform incorporating live video conferencing, patient messaging and cloud collaboration. This will enable seamless integration into the dental practice.

Henry Schein, in July, entered into an exclusive agreement with Radic8 (a U.K.-based manufacturer of air purifier systems) to distribute the latter’s Radic8 Viruskiller air purifier in the United States and Canada. Further, in the same month, Henry Schein announced that its Henry Schein Medical is on track to integrate a web-based clinical decision support system, VisualDx, with Medpod’s telemedicine solutions.

Share Price Performance

Over the past six months, Henry Schein has underperformed the industry. The stock has gained 13.6% compared with the industry's 18.5% rise.

Zacks Rank & Key Picks

Currently, Henry Schein carries a Zacks Rank #3 (Hold).

Some better-ranked stocks from the broader medical space are Amedisys AMED, IDEXX Laboratories IDXX and Integra LifeSciences Holdings IART.

Amedisys’ long-term earnings growth rate is estimated at 14.8%. The company presently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

IDEXX’s long-term earnings growth rate is estimated at 15.8%. It currently carries a Zacks Rank #2.

Integra’s long-term earnings growth rate is estimated at 9%. The company presently carries a Zacks Rank #2.

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