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Why Is Henry Schein (HSIC) Down 1.5% Since Last Earnings Report?

A month has gone by since the last earnings report for Henry Schein (HSIC). Shares have lost about 1.5% in that time frame, outperforming 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 catalysts.

Henry Schein Q2 Earnings Top Estimates, ’22 EPS View Up

Henry Schein, Inc. reported earnings per share of $1.16 in the second quarter of 2022, up 4.5% rise from the year-ago period’s adjusted earnings per share. Moreover, reported earnings per share surpassed the Zacks Consensus Estimate by 3.6%.

Revenues in Detail

Henry Schein reported net sales of $3.03 billion in the second quarter, up 2.1% year over year. The metric missed the Zacks Consensus Estimate by 2.2%.

The year-over-year uptick included 2.4% internal growth in local currencies, 2.1% growth from acquisitions and a 2.4% decline related to foreign currency exchange.

In the quarter under review, the company recorded sales of $2.26 billion in the North American market, up 5.8% year over year. Sales totaled $771 million in the international market, down 7.3% year over year.

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 $1.85 billion of global Dental sales, down 3.1% year over year. In local currencies, the segment’s revenues include an internally-generated sales decline of 0.3%, 0.7% growth from acquisitions and a 3.5% decline related to foreign currency exchange.

Further, the internal decline in local currencies of 0.3% included a 1.1% plunge in North America and a rise of 1% internationally. Overall dental sales performance reflects a continued recovery in patient traffic compared to the pre-pandemic levels.

North America’s dental consumable merchandise’s internal sales in local currencies fell 3.5%, whereas dental equipment internal sales in local currencies rose 8.1%.Internationally, dental consumable merchandise internal sales and dental equipment internal sales, both in local currencies, fell 0.3% and rose 5.5%.

Global Medical revenues rose 10.4% year over year to $996 million. The segment’s revenues include an increase of 6.7% in internal local currencies, 3.9% growth from acquisitions and a 0.3% decline related to foreign currency exchange.

Revenues from global Technology and Value-added Services rose 18.3% to $181 million. This included a rise of 10.8% in internal local currency sales, 8.8% growth from acquisitions and a 1.5% decline related to foreign currency exchange.

Margin Trend

In the reported quarter, gross profit totaled $945 million, reflecting a 6.1% uptick year over year. Gross margin expanded 116 basis points (bps) to 31.2%.

Selling, general and administrative expenses rose 7.1% to $680 million in the quarter under review.

Overall adjusted operating profit was $265 million, reflecting a rise of 3.5% year over year. Meanwhile, the adjusted operating margin contracted 12 bps year over year to 8.7%.

Financial Position

The company exited the second quarter of 2022 with cash and cash equivalents of $108 million compared with $126 million at the end of the first quarter of 2022. Long-term debt for the company at the end of second-quarter 2022 was $769 million compared with $773 million at the end of the first quarter of 2022.

Cumulative net cash provided by operating activities from continuing operations till the end of the second quarter of 2022 was $157 million compared with $159 million in the year-ago period.

During the second quarter of 2022, the company repurchased roughly 1.3 million shares of its common stock. The company had approximately $90 million authorized and available for future stock repurchases by the end of the reported quarter.

2022 Guidance

Henry Schein affirmed the earnings per share guidance for 2022.

For 2022, Henry Schein expects GAAP earnings per share in the range of $4.75 to $4.91, suggesting 7-10% growth over 2021 GAAP earnings per share and growth of 5- 9% compared with 2021 non-GAAP diluted earnings per share. The Zacks Consensus Estimate for the metric is currently pegged at $4.86.

For 2022, Henry Schein expects sales growth of nearly 3% to 6% over 2021 (down from its prior expectation of 5-8% growth). The Zacks Consensus Estimate for revenues is currently pegged at $13.09 billion.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates.

VGM Scores

At this time, Henry Schein has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. 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, Merit Medical (MMSI), a stock from the same industry, has gained 0%. The company reported its results for the quarter ended June 2022 more than a month ago.

Merit Medical reported revenues of $294.98 million in the last reported quarter, representing a year-over-year change of +5.2%. EPS of $0.73 for the same period compares with $0.62 a year ago.

For the current quarter, Merit Medical is expected to post earnings of $0.53 per share, indicating a change of +1.9% from the year-ago quarter. The Zacks Consensus Estimate has changed -3.6% over the last 30 days.

The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Merit Medical. Also, the stock has a VGM Score of B.


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