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Henry Schein (HSIC) Q2 Earnings Top Estimates, 2021 EPS View Up

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Henry Schein, Inc. HSIC reported adjusted earnings per share (EPS) of $1.11 from continuing operations in the second quarter of 2021 compared with the year-ago break-even EPS. Moreover, adjusted EPS surpassed the Zacks Consensus Estimate by 16.8%. The quarter’s adjustments exclude the impact of certain restructuring charges, and settlement and litigation costs, among others.

GAAP EPS in the second quarter was $1.10 against the year-ago loss per share of 8 cents.

Revenues in Detail

Henry Schein reported net sales of $2.97 billion in the second quarter, up 76.2% year over year. The metric beat the Zacks Consensus Estimate by 2.7%.

The year-over-year uptick resulted from overall market recovery and included 65.5% internal growth in local currencies, 5.5% growth from acquisitions and 5.2% growth related to foreign currency exchange.

Henry Schein, Inc. Price, Consensus and EPS Surprise

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 quarter under review, the company recorded sales of $2.14 billion in the North American market, up 77.1% year over year. Sales totaled $831.9 million in the international market, up 73.7% year over year.

The year-over-year revenue growth was primarily driven by strengthening demand in the global dental and medical markets.

Segment Analysis

Henry Schein derives revenues from three operating segments — Dental, Medical, and Technology and Value-added Services.

In the second quarter, the company recorded $1.91 billion of global Dental sales, up 102.9% year over year. In local currencies, the segment’s revenues include internally-generated sales growth of 87%, 7.3% growth from acquisitions and 8.6% growth related to foreign currency exchange. Further, the internal growth in local currencies of 87% included an increase of 105.3% in North America and an increase of 64.9% internationally.

Henry Schein’s uptick in overall dental sales performance reflects continued recovery in patient traffic compared to pre-pandemic levels.

North America’s dental consumable merchandise’s internal sales in local currencies rose 112.5% whereas dental equipment internal sales in local currencies surged 82%. Internationally, dental consumable merchandise internal sales and dental equipment internal sales, both in local currencies, improved 64.4% and 66.6%, respectively.

Global Medical revenues surged 46.5% year over year to $904.8 million. The segment’s revenues include 45.3% internal growth in local currencies, 2.6% growth from acquisitions and 0.4% growth related to foreign currency exchange.

Revenues from global Technology and Value-added Services rose 44.5% to $152.1 million. This included a rise of 33% in internal local currency sales, 8.9% growth from acquisitions and 2.6% growth related to foreign currency exchange.

Margin Trend

In the reported quarter, gross profit totaled $889.8 million, reflecting a 95.9% uptick year over year. Gross margin expanded 302 basis points (bps) to 29.9%.

Selling, general and administrative expenses rose 52.3% to $678.8 million in the quarter under review.

Overall adjusted operating profit was $210.9 million, reflecting a stupendous surge of 2381.5% year over year. Adjusted operating margin expanded 660 bps year over year to 7.1%.

Financial Position

The company 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 compared with $515.7 million at the end of first-quarter 2021.

During the second quarter of 2021, the company repurchased shares of its common stock for a total of approximately $113 million.

Cumulative net cash provided by operating activities from continuing operations at the end of the second quarter of 2021 was $158.4 million compared with cumulative net cash used by operating activities from continuing operations of $90.7 million in the year-ago period.

2021 Guidance

Henry Schein has raised the guidance for 2021 adjusted EPS from continuing operations, which is now expected to be at or above $3.85 (earlier-provided expectation being at or above $3.70). The Zacks Consensus Estimate for the same is currently pegged at $4.07.

Our Take

Henry Schein exited the second quarter of 2021 on an extremely bullish note with better-than-expected results despite pandemic adversities. The company saw robust performances by all three of its operating businesses. The company’s international performance was also impressive. Strengthening demand in the global dental and medical markets drove strong year-over-year increases in sales in the reported quarter. The company registered strong equipment growth in international markets with no significant delays. Overall dental sales reflect continued recovery in patient traffic compared to the pre-pandemic levels. Expansion of the both margins bodes well.

Meanwhile, continued pandemic-led challenges faced by the end markets in most geographies is concerning. The company’s inability to provide a detailed financial guidance raises apprehensions.

Zacks Rank and Other Key Picks

Henry Schein currently carries a Zacks Rank #2 (Buy).

A few other top-ranked stocks in the broader medical space that have announced their quarterly results are Encompass Health Corporation EHC, West Pharmaceutical Services, Inc. WST and Chemed Corporation CHE.

Encompass Health, carrying a Zacks Rank #1 (Strong Buy), reported second-quarter 2021 adjusted EPS of $1.17, which beat the Zacks Consensus Estimate by 15.8%. Revenues of $1.3 billion outpaced the consensus mark by 1.5%. You can see the complete list of today’s Zacks #1 Rank stocks here.

West Pharmaceutical, carrying a Zacks Rank #1, reported second-quarter 2021 adjusted EPS of $2.46, which surpassed the Zacks Consensus Estimate by 41.4%. Revenues of $723.6 million outpaced the Zacks Consensus Estimate by 8.7%.

Chemed, carrying a Zacks Rank #2, reported second-quarter 2021 adjusted EPS of $4.60, surpassing the Zacks Consensus Estimate by 3.4%. Revenues of $532.3 million surpassed the Zacks Consensus Estimate by 0.8%.


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