On Dec 13, we maintained our long-term Neutral recommendation
Henry Schein Inc.
) following its third-quarter 2013 results. This leading global
distributor of health care products and services carries a Zacks
Rank #3 (Hold).
Why Still Neutral?
Henry Schein reported disappointing third-quarter 2013 results
with both the top and bottom line missing the Zacks Consensus
Estimate. The company reported adjusted earnings per share (EPS)
of $1.22 in the third quarter, up 12.9% year over year but below
the Zacks Consensus Estimate of $1.40. Revenues increased 5.3%
year over year to $2.34 billion, but failed to meet the Zacks
Consensus Estimate of $2.36 billion.
The year-over-year growth at both the fronts is indicative of
the company's consistent growth via organic and inorganic means.
The company continues to gain from its broad footprint in the
fast growing animal health market. Growth in its core dental
business also bolsters confidence. Henry Schein is well
positioned to further gain from its extensive global foothold and
diverse channel mix. It also stands to gain from attractive
market dynamics and favorable demographic trends.
We are encouraged to find that in spite of the austerity
measures in Europe, HSIC continues to garner market share in the
Dental segment. Moreover, the recent strategic acquisition
announced on Oct 29 to enter South Africa, along with plans to
expand global footprint, is expected to act as a growth catalyst
for the company.
We are upbeat on future growth prospects, owing to Henry
Schein's efficient use of cash to make tuck-in acquisitions. New
offerings and the company's strategic buyouts should foster
growth. Meanwhile, attractive returns to shareholders through
share repurchase activities help to boost investors'
However, these positive factors are partly tempered by the
current economic scenario that has bolstered the bargaining power
of Group Purchasing Organization (GPO). The austerity measures
across Europe continue to adversely affect the healthcare
industry. A tough competitive landscape and currency headwinds
also weigh heavily on the stock.
Given the current growth trend, the company has reiterated its
guidance for 2013. The company envisages adjusted EPS in the
range of $4.86−$4.91, representing growth of 9% to 11% year over
year, compared with the prior guidance of $4.81−$4.91.
Stocks that Warrant a Look
While we remain on the sidelines for Henry Schein, we are
Align Technology Inc.
Cardinal Health, Inc.
) doing well. These stocks carry a Zacks Rank #1 (Strong
ALIGN TECH INC (ALGN): Free Stock Analysis
CARDINAL HEALTH (CAH): Free Stock Analysis
HENRY SCHEIN IN (HSIC): Free Stock Analysis
MCKESSON CORP (MCK): Free Stock Analysis
To read this article on Zacks.com click here.