Henry Schein, Inc. HSIC has been gaining on its extensive global foothold and diverse channel mix. Favorable dental business trend is encouraging. Moreover, the raised earnings guidance is indicative of company’s bullish trend. However, economic problems and a stiff competitive landscape are concerning.
Over the past year, this Zacks Rank #1 (Strong Buy) stock has gained 28.4% compared with 27.2% growth of the industry and 35.8% rise of the S&P 500 composite.
The renowned global distributor of health care products and services has a market capitalization of $10.75 billion. The company expects to maintain strong product performance. It surpassed earnings estimates in the trailing four quarters, the average surprise being 49.16%.
Per our Style Score, Henry Schein has Growth Score of A, which is reflective of the company’s solid prospects. Our research shows that stocks with a Growth Style Score of A or B combined with a Zacks Rank #1 or 2 (Buy) offer the best upside potential.
Let’s delve deeper.
Widespread Network and Channel Mix: Henry Schein’s distribution business boasts of a wide global footprint with 61 distribution centers. Apart from North America and Europe, the company has presence in Australia and New Zealand as well as in emerging nations like China, Brazil, Israel, Czech Republic and Poland. We believe Henry Schein’s worldwide reach is a major competitive advantage over other players in the healthcare distribution industry. The company registered improved patient traffic in the first quarter despite few countries entering into more stringent lockdown rules, with continued overall recovery.
Dental Business Trends Favorable for the Long Term: We are optimistic about Henry Schein’s strategy to expand digital dentistry globally. Henry Schein is busy promoting digital workflows for general dentistry as well as dental specialties. The company is currently focusing on offering a diversified portfolio and value-added services, along with favorable end market.
Per a report by The Business Research Company, the global dental services market was valued at approximately $436.2 billion in 2018, seeing a CAGR of 7.4% since 2014. The market is expected to reach approximately $629.3 billion by 2022, witnessing a CAGR of 9.6%.
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Upbeat Guidance: Henry Schein has raised the guidance for 2021’s adjusted earnings per share from continuing operations, which is now expected to be at or above $3.70 (up from its earlier-provided expectations of the adjusted earnings per share being at or above 2019’s comparable figure of $3.51).
Contagion of Economic Problems: The current macroeconomic environment across the globe has affected Henry Schein’s financial operations. Governments and insurance companies continue to look for ways to contain the rising cost of healthcare. This might put pressure on players in the healthcare industry, with Henry Schein being no exception.
Tough Competition: 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 Patterson Dental business of Patterson Companies Inc. and Benco Dental Supply.
Henry Schein has been witnessing a positive estimate revision trend for 2021. Over the past 90 days, the Zacks Consensus Estimate for its earnings has moved 9.5% north to $4.03.
The Zacks Consensus Estimate for second-quarter 2021 revenues is pegged at $2.89 billion, suggesting a 71.8% surge from the year-ago reported number.
A few other top-ranked stocks from the broader medical space are Envista Holdings Corporation NVST, Inogen, Inc INGN and Phibro Animal Health Corporation PAHC, each carrying a Zacks Rank #2. You can see the complete list of Zacks #1 Rank stocks here.
Envista Holdings has an estimated long-term earnings growth rate of 26%.
Phibro Animal Health has an estimated long-term earnings growth rate of 11%.
Inogen has a projected long-term earnings growth rate of 20%.
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