Henry Schein (HSIC) Set to Post Q3 Earnings: What Awaits?
Henry Schein, Inc. HSIC is expected to release third-quarter 2023 results soon.
The company posted adjusted earnings per share (EPS) of $1.31 in the last reported quarter, which surpassed the Zacks Consensus Estimate by 4.8%. Henry Schein beat earnings estimates in two of the trailing four quarters, missed once and was break-even in one quarter, the average surprise being 0.82%.
Let’s see how things have shaped up prior to this announcement.
Factors at Play
In the third quarter of 2023, we expect Henry Schein to have continued to progress in the 2022-2024 BOLD+1 Strategic Plan, which calls for the company to focus on internal growth and business development activities on high-growth, high-margin opportunities, particularly with innovative products and services.
Similar to the last reported quarter, the fundamentals of Henry Schein’s core business are likely to have remained solid. The sales growth of the North American Dental business is likely to have been driven by equipment and general merchandise sales. The demand environment for dental services is expected to have sustained as Henry Schein’s customers continue investing in their practices.
Henry Schein, Inc. Price and EPS Surprise
Henry Schein, Inc. price-eps-surprise | Henry Schein, Inc. Quote
In the third quarter of 2023, dental equipment sales in North America are likely to have been supported by a steady equipment backlog. The company is likely to have witnessed strong sales from traditional equipment, while digital equipment sales, which returned to growth last quarter, are also likely to have contributed. Meanwhile, the international equipment market is likely to have progressed in returning to pre-pandemic levels.
Within Henry Schein’s Dental Specialty business, we expect sales of dental implants and biomaterials are likely to have been key growth drivers. Similar to the last reported quarter, the endodontic business is expected to have complemented business growth, driven by the Brasseler and Edge brands in both North America and internationally.
The Orthodontic business is likely to have benefited from the steady progress in the clear aligner business despite being a relatively small component of global revenues. Henry Schein has been witnessing an increase in dental specialty practices being acquired by DSOs (Dental Service Organizations).
In addition, implant sales growth in North America is likely to have increased with the combined Biohorizons Camlog premium product line, which showed a sequential improvement in the second quarter with mid-single-digit growth. Further, sales of the product line offered by Medentis and bone regeneration materials are likely to reflect the demand for value-priced products in the to-be-reported quarter. Across international regions, we expect the demand for implant systems to have remained stable.
In April 2023, Henry Schein closed the Biotech Dental transaction, bringing its comprehensive, integrated suite of planning and diagnostic software to the company’s existing portfolio of digital dental solutions, as well as the fast-growing portfolio of implants and clear aligners. The company also highlighted its entry into the Brazilian implant market with the acquisition of S.I.N. Implant Systems business, having served dental practitioners in the country since 2014.
Biotech and S.I.N. deals provide a competitive advantage to Henry Schein in the implant and bone regeneration space, including the opportunity to expand their cost-competitive products to other geographies, including the United States. HSIC also became a majority investor in Large Practice Sales LLC — a leading advisor to independent dental practices on their sale or partnerships with larger general practice and dental specialists. All these strategic developments are likely to have favored the company’s top line in the third quarter of 2023.
On the medical business side, we also expect the business to have given a decent performance in the third quarter, excluding the sales of PPE products and COVID-19 test kits. Henry Schein’s recent announcement to acquire a majority stake in Shield Healthcare, Inc. represents a further investment in the homecare medical supplies market, delivering products directly to patients in their homes.
Per our model, projected global revenues from the Healthcare distribution segment (comprising the global dental and medical businesses) for the third quarter of 2023 stand at $3.01 billion, suggesting an increase of 4.2% from the prior-year reported figure.
Within the technology and value-added services business, the largest component — Henry Schein One — is likely to have delivered another solid quarter. The ongoing migration to cloud-based practice management software solutions, Dentrix Ascend and Dentally, is likely to have driven the segment’s performance and growth in the revenue cycle management business, resulting from increased patient traffic driving a higher volume of e-claims.
Apart from Henry Schein One’s technology solutions, the company currently offers a broad range of value-added services through its businesses, such as eAssist — which provides revenue cycle management — and Unitas, which offers advice on PPO agreements with insurance providers, along with other services such as financial services, practice transitions, staffing services, education and remote patient monitoring for office-based dental and medical practitioners. In the third quarter of 2023, we assume these services to have positively contributed to the company’s top line.
Our model projects global Technology and Value-Added Services business revenues for the third quarter of 2023 to be $187.2 million, suggesting a year-over-year improvement of 6.3%.
Q3 Estimates
The Zacks Consensus Estimate for HSIC’s third quarter 2023 revenues is pegged at $3.20 billion. This suggests an increase of 4.3% from the year-ago reported figure.
The Zacks Consensus Estimate for its third quarter 2023 EPS of $1.33 indicates a year-over-year rise of 15.7%
What Our Model Suggests
Per our proven model, a stock with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold), along with a positive Earnings ESP, has a higher chance of beating estimates, which is not the case here.
Earnings ESP: Henry Schein has an Earnings ESP of -2.18%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: The company currently carries a Zacks Rank #3.
Stocks Worth a Look
Here are some medical stocks worth considering as these have the right combination of elements to post an earnings beat this quarter.
Insulet PODD has an Earnings ESP of +6.61% and a Zacks Rank #2. The company will release third-quarter 2023 results on Nov 2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Insulet has a long-term expected earnings growth rate of 35.7%. PODD has an earnings yield of 1.13% against the industry’s -2.58%.
Acadia Pharmaceuticals ACAD has an Earnings ESP of +6.76% and a Zacks Rank #2. The company is scheduled to release third-quarter 2023 results on Nov 2.
ACAD has an expected long-term earnings growth rate of 43.4%. In the trailing four quarters, the company delivered an average earnings surprise of 20.33%.
Medpace MEDP currently has an Earnings ESP of +2.29% and a Zacks Rank #2. The company recently released its third-quarter 2023 results on Oct 23.
Medpace has an expected earnings growth rate of 17.9% for the next year. MEDP’s earnings beat estimates in all the trailing four quarters, the average surprise being 14.62%.
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