Henry Schein (HSIC) Q4 Earnings: Disappointment in Store?

Henry Schein, Inc.HSIC is expected to report fourth-quarter 2016 financial numbers on Feb 8, before the opening bell.

Last quarter, this renowned healthcare products and service distributor posted a positive earnings surprise of 1.82%. Encouragingly, Henry Schein's earnings surpassed the Zacks Consensus Estimate in the past four quarters, at an average of 1.43%.

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

Factors at Play

Henry Schein expects sluggish dental sales to impact the company's top line in the quarter to be reported. Management had earlier provided a cautious guidance for the North American dental market. Notably, the U.S. healthcare products and service distribution industry is highly competitive and consists mainly of national, regional and local distributors. In this region, the company is facing stiff competition from other players in the dental products space. Thus, the tussle for market share may affect the upcoming quarterly results.

Henry Schein, Inc. Price and EPS Surprise

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

Henry Schein's year-over-year deterioration in gross and operating margin due to higher cost of sales and expenses is another matter of concern. In the third quarter, management claimed that the company's low-margin flu vaccine sales had adversely affected the quarter's operating margin. We expect this problem to linger in the forthcoming quarter as well.

Meanwhile, as per recent market analysts, pricing pressure may continue to hamper the stock's progress. The political and government involvement will remain a risk for health care companies over the long term, as they look for ways to control the rising costs of health care. Moreover, management expects Brexit and currency fluctuations to dent results in the forthcoming quarter.

On a brighter note , Henry Schein recently completed a majority acquisition of Brazil-based Dental Cremer S.A. This will boost the former's Global Dental business and fortify its position in the Brazilian market. We expect the latest addition to start contributing to results from the fourth quarter itself.

Further, throughout the fourth quarter, the company has announced live dentistry events and a range of new solutions such as digital impression scanners. All these are designed to help oral health professionals operate more productively and efficiently. The new initiatives should also help Henry Schein deliver a better performance going ahead.

Estimate Revision Trend

For the fourth quarter of 2016, there has been no change in estimate revisions over the last seven days. The same can be observed in the magnitude of the estimate revision trend with earnings estimates remaining at $1.84 over the same time frame.

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 0.00%. That is because both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at $1.84. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter .

Zacks Rank : Henry Schein has a Zacks Rank #4. Please note that we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Here are some companies you may want to consider as our proven model shows they have the right combination of elements to post an earnings beat in the upcoming quarter:

Cempra Inc. CEMP has an Earnings ESP of +15.79% and a Zacks Rank #2. You can see the complete list of today's Zacks #1 Rank stocks here.

Molina Healthcare Inc. MOH has an Earnings ESP of +5.33% and a Zacks Rank #2.

Universal Health Services, Inc. UHS has an Earnings ESP of +4.97% and 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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