Henry Schein Inc . ( HSIC ) reported
earnings per share (EPS) of $1.26 in the fourth quarter of 2012,
reflecting a beat of 5% over the Zacks Consensus Estimate. The
result also underlines year-over-year growth of 9.6%.COOPER COS (COO): Free Stock Analysis ReportHENRY SCHEIN IN (HSIC): Free Stock Analysis
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Full year 2012 adjusted EPS (excluding restructuring costs) came
in at $4.44, sailing past the prior-year result as well as the
Zacks Consensus Estimate by 11.8%.
Henry Schein reported revenues of $2.41 billion in the quarter, up
2.9% year over year. However, the quarterly revenues were
marginally ahead of the Zacks Consensus Estimate of $2.40 billion.
The surge in revenues was led by 3.5% growth in local currencies
with a 6% and 5% rise in internal sales and acquisition,
respectively, partially offset by the impact of one extra week in
2011 (7.5%). Unfavorable foreign currency exchange muted the local
currency growth by (0.6%).
Annual revenues increased 4.8% year over year to $8.94 billion in
2012, edging past the Zacks Consensus Estimate of $8.93 billion.
This annual growth comprised of 6.7% climb in local currencies with
a 5.1% increase in local internal sales and acquisition growth of
3.1%, partially offset by the impact of one extra week in 2011
(1.5%). Unfavorable foreign currency movement dragged the local
currency sales growth by (1.9%).
Quarter in Detail
Henry Schein derives revenues from dental, medical, animal health
and technology and value-added services. In the reported quarter,
the company derived $1.3 billion in revenues from global dental
sales, down 2.4% year over year. This includes an adverse impact of
1.5% from local currencies and 0.9% related to foreign exchange
headwind. The franchise witnessed 7% growth in North America on the
back of 21.9% surge in North America Dental equipment sales.
International sales declined 1.5% due to weak capital spending
environment across Europe, especially in Germany and the
Netherlands as well as Australia.
Worldwide medical sales inched up 1.1% year over year to $402.4
million reflecting 1.4% growth in local currencies and decline of
0.3% due to unfavorable foreign exchange. Henry Schein recorded
sequential growth in the North American medical business with
growth in the international market as well.
The company's global animal health segment witnessed 16.1% growth
in revenues to $611.2 million in the quarter, including 16.4% surge
in local currencies and a negative impact of 0.3% related to
foreign currency exchange. The franchise recorded accelerated
growth in North America on the back of rising market share.
However, international market was somewhat sluggish due to
Revenues from technology and value-added services climbed 15% to
$81.4 million. This included 14.8% growth in local currencies
offset by a 0.8% dip from foreign exchange headwinds. While
macroeconomic factors dragged the results in the international
market, sales accelerated in North America.
Gross margin in the quarter was 27.5%, down 40 basis points (bps)
year over year. This was primarily due to unfavorable product mix.
Operating margin was 7.5%, up 50 bps.
Henry Schein exited 2012 with cash and cash equivalents of $122.1
million, down 17.1% from 2011. During the reported quarter, the
company repurchased 1.1 million shares for $84.2 million and was
left with $300 million of authorization for future
In a bid to reduce its interest expense, Henry Schein plans to
refinance the debt of roughly $220 million associated with Butler
Schein Animal Health transaction. The move is expected to be
accretive to annual EPS by 2-3 cents. The refinancing is expected
to close by the end of the first quarter of 2013.
Henry Schein issued guidance for 2013. The company envisages
adjusted EPS in the range of $4.81−$4.91, representing growth of
8%−11% year over year. The current Zacks Consensus Estimate of
$4.84 lies within the guided range.
We are encouraged by Henry Schein's results which beat the Zacks
Consensus Estimate. The company continues to drive strong top-line
growth and establish domestic and international footprints in
dental, animal health and medical supply distribution. However,
unfavorable foreign exchange headwinds and a contagion of economic
problems across Europe are likely to undermine its operating
results. Further, softness in the core franchise is a matter of
Nevertheless, we believe that Henry Schein is well poised to drive
growth as its diversified business offers resilience against
macroeconomic problems. The company's performance should improve
with the gradual recovery in the economy. The EPS guidance for 2013
also encourages bullish sentiments.
As a result, the stock carries a Zacks Rank #2 (Buy). Other
industry stocks carrying Zacks Rank #2 are Patterson
Companies ( PDCO ), MWI
Veterinary Supply ( MWIV ) and The
Copper Companies ( COO ).