Why Is Henry Schein (HSIC) Down 1.8% Since Last Earnings Report?
A month has gone by since the last earnings report for Henry Schein (HSIC). Shares have lost about 1.8% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Henry Schein due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Henry Schein Q4 Earnings Miss, Operating Margin Down
Henry Schein registered adjusted earnings per share of 66 cents in the fourth quarter of 2023, down 51.1% from the year-ago period’s adjusted earnings per share. The metric also lagged the Zacks Consensus Estimate by 5.7%.
For the full year, adjusted earnings were $4.50 per share, down 16.4% from the year-ago period’s levels and also missed the Zacks Consensus Estimate by 1.3%.
Revenues in Detail
Henry Schein reported net sales of $3.02 billion in the fourth quarter, down 10.5% year over year. The metric lagged the Zacks Consensus Estimate by 2%.
The year-over-year decrease reflects an internal sales decline of 12%, calculated at constant foreign exchange rates, excluding sales from acquisitions and adjusting for the extra week in 2022.
Total revenues in 2023 were $12.34 billion, down 2.4% from the year-ago period’s levels. The figure lagged the Zacks Consensus Estimate by 0.5%.
Geographically, the company recorded sales of $2.22 billion in North America, down 14.5% year over year.
Sales totaled $801 million in the International market, up 2.8% year over year.
Segmental Analysis
Henry Schein derives revenues from three operating segments — Dental, Medical and Technology and Value-Added Services.
In the fourth quarter, the company recorded $1.80 billion in global Dental sales, down 10.2% year over year.
Global Medical revenues declined 14.8% year over year to $1.00 billion.
Revenues from global Technology and Value-Added Services rose 13.4% to $212 million.
Margin Trend
In the reported quarter, the gross profit totaled $925 million, reflecting a 7.4% decrease year over year. However, the gross margin expanded 102 basis points (bps) to 30.7% on an 11.8% decrease in the cost of sales.
SG&A expenses rose 6% to $807 million in the quarter under review. The adjusted operating profit in the fourth quarter was $118 million compared with $238 million in the year-ago period. Meanwhile, the adjusted operating margin contracted 315 bps year over year to 3.9%.
Liquidity Position
Henry Schein exited the fourth quarter of 2023 with combined cash and cash equivalents of $171 million, compared with $117 million at the end of 2022.
Cumulative net cash provided by operating activities at the end of the fourth quarter was $500 million, compared with $602 million the year before.
HSIC repurchased nearly 692,000 shares of its common stock for $50 million during the quarter. The company had approximately $265 million authorized and available for future stock repurchases at the end of 2023.
2024 Guidance
Henry Schein initiated its 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 $5.00-$5.16, suggesting 11 growth from the 2023 reported figure. The Zacks Consensus Estimate for the metric is currently pegged at $5.10.
Henry Schein expects 2024 sales growth of nearly 8 compared with the reported figure in 2023. The Zacks Consensus Estimate for revenues is currently pegged at $12.91 billion.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
The consensus estimate has shifted -5.83% due to these changes.
VGM Scores
At this time, Henry Schein has a subpar Growth Score of D, a grade with the same score on the momentum front. However, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Henry Schein has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
Henry Schein is part of the Zacks Medical - Dental Supplies industry. Over the past month, West Pharmaceutical Services (WST), a stock from the same industry, has gained 10.3%. The company reported its results for the quarter ended December 2023 more than a month ago.
West Pharmaceutical reported revenues of $732 million in the last reported quarter, representing a year-over-year change of +3.3%. EPS of $1.83 for the same period compares with $1.77 a year ago.
West Pharmaceutical is expected to post earnings of $1.31 per share for the current quarter, representing a year-over-year change of -33.8%. Over the last 30 days, the Zacks Consensus Estimate has changed -9.5%.
West Pharmaceutical has a Zacks Rank #4 (Sell) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of B.
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