Henry Schein (HSIC) Q4 Earnings to Show Growth in All Lines?

Henry Schein, Inc.HSIC is expected to report fourth-quarter 2017 results on Feb 20.

Last quarter, the company missed earnings estimates by 3.3%. However, Henry Schein's earnings surpassed the Zacks Consensus Estimate in three of the past four quarters, at an average of 1.5%.

Let's see how things are shaping up prior to this announcement.

Factors at Play

Henry Schein's third-quarter 2017 results were quite impressive, recording growth across all four segments - Dental, Animal Health, Medical and Technology and Value-Added Services. Geographically, the company gained traction in North America and overseas. We expect a similar trend in the fourth quarter.

Favorable Dental Business Trends : The company's strategy to expand digital dentistry globally is encouraging. We are also upbeat about management's expectations of at least low single-digit growth in North America's dental consumable merchandise market in the second half of 2017. The Zacks Consensus Estimate for fourth-quarter total revenues of $3.31 billion reflects an increase of 6.1% from the year-ago quarter.

The company banks on digital dentistry, which is part of its strategic plan. Henry Schein is busy promoting digital workflows for general dentistry as well as dental specialties. Starting Sep 1, 2017, the company started selling the full range of Dentsply Sirona dental equipment across North America, including the leading CEREC CAD/CAM restoration system. This is expected to boost the top line to a considerable extent. Henry Schien will also continue to represent products from Planmeca, A-dec, Midmark, 3Shape and 3M as well as the dental equipment and consumer product lines of its longstanding partner Danaher under the KaVo Kerr brands.

Henry Schein, Inc. Price and EPS Surprise

Henry Schein, Inc. Price and EPS Surprise | Henry Schein, Inc. Quote

Solid Animal Health Portfolio : We are optimistic about the well-diversified Animal Health product portfolio featuring software, diagnostic equipment, and surgical instruments. The solid product offerings have been driving growth domestically as well as globally.

Notably, during the fourth quarter, Henry Schein acquired Merritt Veterinary Supplies and integrated it into its Animal Health business. Merritt has 4,500 veterinary clinics in Eastern United States, with a strong presence in the Southeastern part of the nation. The company offers a comprehensive line of products, including pharmaceuticals, diagnostics and equipment. However, according to Henry Schein, this acquisition will drive earnings post 2017.

Growing Medical Business : Henry Schein is consistently working on boosting its Medical segment. Notably, worldwide Medical revenues rose 8% year over year in the last reported third quarter. In October, the company inked an agreement with Cerebral Assessment Systems to distribute Cognivue. This is the first computerized cognitive assessment screening device cleared by the FDA for the detection of early signs of dementia. We believe this development will bolster growth for the company in the field of mental cognitive diseases.

In the same month, the company announced an exclusive distribution agreement with Terason to distribute the latter's uSmart 3200T NexGen. This development remains part of Henry Schein Medical's Emergency Medical Services business.

Broad Distribution Network : We are also upbeat about the company's widespread distribution network. Apart from North America and Europe, the company has presence in Australia and New Zealand as well as in emerging nations like China, Brazil, Israel, Czech Republic and Poland.

On the flip side, Henry Schein's disappointing gross and operating margin performance over the past few quarters due to higher cost of sales and expenses is a matter of concern.

This apart, currency fluctuations and a tough competitive landscape add to the woes. Also, the entry of group purchasing organizations (GPOs) in the United States has intensified competition.

Overall, Henry Schein expects 2017 EPS in the range of $3.59-$3.61, reflecting 8-9% growth from the 2016 adjusted EPS figure of $3.31.

Earnings Whispers

Our proven model does not conclusively show that Henry Schein is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here as you will see below.

Zacks ESP : Henry Schein has an Earnings ESP of -0.94%. This is because the Most Accurate estimate is pegged at 96 cents while the Zacks Consensus Estimate stands at 97 cents.

Zacks Rank : Henry Schein carries a Zacks Rank #3, which increases the predictive power of ESP. However, an ESP of -0.94% makes surprise prediction difficult.

Nonetheless, the Zacks Consensus Estimate for fourth-quarter 2017 adjusted earnings of 97 cents, reflects a rise of 3.2% year over year.

Stocks Worth a Look

Here are a few medical stocks worth considering as they have the right combination of elements to post an earnings beat this quarter.

Amphastar Pharmaceuticals AMPH has an Earnings ESP of +264.7% and a Zacks Rank #1. You can see the complete list of today's Zacks #1 Rank Stocks Here .

Audro Biotech, Inc. ADRO has an Earnings ESP of +2.8% and a Zacks Rank #3.

The Cooper Companies, Inc. COO has an Earnings ESP of +0.2% and a Zacks Rank #3.

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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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