Henry Schein, Inc.
) reported adjusted earnings per share (EPS) of $1.43 in the
fourth-quarter of 2013, up 13.5% year over year. Moreover, the
results beat the Zacks Consensus Estimate of $1.39 by 2.9%.
For the full year 2013, the company reported adjusted earnings
of $4.95 per share, up 11.5% from the previous year. The reported
EPS also surpassed the company's guidance range of $4.86 - $4.91
as well as the Zacks Consensus Estimate of $4.90.
Revenues in Detail
Henry Schein reported revenues of $2.53 billion in the fourth
quarter, increasing 4.9% year over year. The top line edged past
the Zacks Consensus Estimate of $2.52 billion. The year-over-year
improvement was led by 4.4% growth in local currencies with 3.7%
and 0.7% rise in internal sales and acquisitions, respectively.
Favorable foreign exchange accounted for nominal 0.5% growth.
Reported revenues for the full year amounted to $9.56 billion,
up 6.9% year over year. The figure was at par with the Zacks
Segments in Detail
Henry Schein derives revenues from four operating segments,
viz Dental, Medical, Animal Health, and Technology and
In the fourth quarter, the company derived $1.36 billion in
revenues from global Dental sales, up 3.9% year over year.
Segment revenues include local currency growth of 3.1%, which
comprises acquisition growth of 0.5% combined with internal sales
rise of 2.6%. Revenue performance was also supported by growth of
0.8% related to favorable foreign exchange. The franchise
witnessed an improvement of 2.1% in North America while
international sales increased 3.5%.
Worldwide Medical sales scaled up 4.8% year over year to $421.9
million based on local currency growth of 4.6%. Foreign
exchange movement aided a rise of 0.2% in segment results.
Overseas business revenues increased allowing the company to
perform well globally.
The company's global Animal Health segment witnessed 6.6%
improvement in revenues to $651.7 million. This was owing to
internal sales rise of 4.8%, along with acquisition growth of
1.8%. Franchise revenues rose 7% in North America while overseas
revenues scaled up 2.9%.
Revenues from global Technology and Value-added Services climbed
8.6% to $88.4 million. This included 8.9% rise in local
currencies with acquisition growth of 0.3% and internal sales
improvement of 8.6%. At the same time, the positives were offset
by a 0.3% dip from foreign exchange headwinds. While the segment
revenues in North America shot up 6.9%, international revenues
grew 21% in the quarter. Growth in the segment can be attributed
to electronic services recurring revenue, software sales and
Gross profit increased 4.5% to $0.69 million in the fourth
quarter of 2013. The gross margin was up 20 basis points (bps) to
27.7% compared with the year-ago quarter equivalent.
With selling, general & administrative expenses rising 6.3%
to $0.51 million, operating margin decreased approximately 13 bps
year over year to 7.4%. According to Henry Schein, after
excluding the impact of acquisition-related expenses in the year,
the fall in operating margin was a mere 5 bps.
Exiting 2013, Henry Schein had cash and cash equivalents of
$188.6 million, up from $122.1 million at the end of 2012. In the
reported quarter, operating cash flow was $274.6 million, up
37.5% year over year. The company also reported total long-term
debt of $450.2 million as of Dec 28, 2013.
During the reported quarter, the company bought back 664,000
shares for $73.8 million and was left with $300 million of
authorization for future repurchases.
Henry Schein reaffirmed its EPS guidance for 2014. The company
still expects EPS in the range of $5.29 - $5.39 (or annualized
growth of 7%-9%). Notably, last month, the guidance was trimmed
from the earlier provided range of $5.37-$5.47 (annualized growth
rate of 10%-12%) as Henry Schein expected the impending
acquisition of 5 companies from Arseus to have a dilutive impact
of 3 cents to 2014 EPS. The Zacks Consensus Estimate for 2014 is
pegged at $5.39 per share, which matches the higher end of the
Henry Schein beat the Zacks Consensus Estimate on both the top
and bottom lines. Year-over-year growth at both fronts is also
indicative of the company's consistent growth via organic and
inorganic means across all its segments. We are, at the same
time, encouraged by the global performance of the company during
the fourth quarter.
We believe that the stabilization of the European market and
the acquisition of BioHorizons, Camlog, Arseus and Lincoln Dental
Supply will enhance performance at the company's dental segment.
With the acquisition of Logiciel Julie, (one of the five
businesses acquired from Arseus), we expect revenues to gain
traction in the Global Technology and Value-Added Services
However, these positive factors are not without the threat of
the current economic scenario that can pose difficulties for
Henry Schein in the near term. A tough competitive landscape and
currency headwinds are also likely to weigh heavily on the
company's operational and stock performance. Lowering of 2014
guidance, although because of amortization related expense to
certain acquisitions was another downside.
Currently the stock carries a Zacks Rank #3 (Hold). Other
stocks such as
Align Technology Inc.
Cardinal Health, Inc.
CR Bard Inc.
) also appear impressive. All these stocks also carry a Zacks
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CARDINAL HEALTH (CAH): Free Stock Analysis
HENRY SCHEIN IN (HSIC): Free Stock Analysis
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