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Henry Schein: Q1 Results Strong, Expansion Plans on Track

On Jun 3, we issued an updated research report on Melville, NY-based Henry Schein, Inc.HSIC - a leading distributor of health care products and services across the globe. The company currently carries a Zacks Rank #2 (Buy).

Henry Schein made an impressive start to 2016, with its top and bottom line beating the Zacks Consensus Estimate in the first quarter. The recent acquisitions of VetStreet and RxWorks add to the company's strength as these are expected to enhance Henry Schein's geographic presence.

Henry Schein's distribution business has a wide global footprint with 61 distribution centers. Earlier, the company had forayed into Japan, the world's second-largest dental market and Poland, the sixth largest economy in the European Union. To expand its dental business in Japan, the company recently collaborated with J.Morita which will allow Henry Schein serve approximately 20% of the nation's dental market.

Henry Schein's revenue growth has been long supported by niche acquisitions. In the first quarter, Henry Schein took over an 80.1% interest in Vetstreet, a leading provider of marketing solutions and health information analytics. The company expects this deal to meaningfully complement its U.S. Animal Health business and prove accretive to earnings by $0.01-$0.02 in 2017 and beyond.

We are looking forward to the company's recent takeover of a 90% stake in Italy-based Dental Trey which has has already brought in $8.5 million of initial goodwill. According to Henry Schein, this deal will be accretive by less than $1 cent to the company's earnings in 2017 and beyond. Henry Schein has also agreed to acquire a majority ownership interest in Dental Cremer - a distributor of dental supplies and equipment in Brazil. The deal is expected to close by the end of 2016. Henry Schein also bought RxWorks in the first quarter of 2016 to strengthen its practice management software business.

On the flip side, unfavorable currency translation continues to be a major dampener for the stock, accounting for a 1.9% decline in overall revenues in the first quarter.

Foreign currency exchange also had a 2-cent per share impact on EPS in the reported quarter. Intensifying competition and increasing pricing pressure owing to rising group purchasing organizations pose threat to the stock.

Key Picks in the Sector                

Other favorably ranked medical stocks are Baxter International Inc. BAX , Boston Scientific Corporation BSX and LeMaitre Vascular, Inc. LMAT . While Baxter sports a Zacks Rank #1 (Strong Buy), Boston Scientific and LeMaitre Vascular carry a Zacks Rank #2.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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