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Henry Schein (HSIC) to Report Q2 Earnings: What's in Store?

Henry Schein, Inc. HSIC is scheduled to report second-quarter 2020 results on Aug 4, before market open.

In the last-reported quarter, the company’s earnings of 94 cents beat the Zacks Consensus Estimate by 28.8%. Over the trailing four quarters, its earnings outperformed the Zacks Consensus Estimate on all occasions, the average beat being 10.30%.

Let’s see how things have shaped up prior to this announcement.

Factors to Note

Dental Business

Henry Schein’s second-quarter results are likely to reflect pandemic-led business disruptions. As confirmed by the company during its first-quarter earnings call in May, the company’s sales growth was adversely impacted by pandemic-induced closures of dental practices. Further, the company’s dental customers across the globe began to suspend operations since mid-March, except for emergency procedures. This further dragged down revenues in the first quarter. With the pandemic situation remaining unchanged, this trend is likely to have continued in the second quarter.

Henry Schein, Inc. Price and EPS Surprise

 

Henry Schein, Inc. Price and EPS Surprise

Henry Schein, Inc. price-eps-surprise | Henry Schein, Inc. Quote

Henry Schein’s software communications tools business is again expected to have witnessed a drop in sales on reduced transactional services and fewer patient visits.

The company has been making concerted efforts to expand in the field of digital dentistry globally. It has thus most likely benefited from digitalization in the international dental market in the second quarter. However, the postponement of non-emergency and elective procedures is expected to have hurt the digital dentistry segment business in the to-be-reported quarter.

ACE Surgical, a subsidiary of Henry Schein, entered into a partnership with EnvisionTec in June to package and sterilize 3D-printed nasal swabs used for COVID-19 testing. The collaboration, which is part of repurposing of the company’s manufacturing capabilities, is expected to have contributed to the second-quarter top line.

The Zacks Consensus Estimate for second-quarter North American dental revenues is pegged at $291 million, suggesting a 70.2% fall from the year-ago reported figure. The consensus estimate for International Dental revenues is pegged at $223 million, implying a 64.4% fall from the prior-year reported number.

Medical Business

Henry Schein’s medical business is again expected to have recorded robust demand for its personal protective equipment (PPE), thanks to the pandemic. To meet the rising demand, the company has worked with suppliers to expand the availability and to prioritize the delivery of critical PPE. It also introduced rapid test solutions for health care professionals. This is likely to have driven the second-quarter top line.

Closure of medical practices and attending to limited number of patients are likely to have weighed on revenues in the second quarter. Despite that, the company might have benefitted from increasing critical-care customers interaction in hospital settings or with their physicians online through telemedicine.

In this regard, Henry Schein’s U.S. medical business, Henry Schein Medical, launched a web-based clinical decision support system, VisualDx, to aid health care professionals attending patients virtually or in person amid the COVID-19 outbreak. This is likely to have boosted the company’s telemedicine revenues in the second quarter.

In the second half of March, Henry Schein announced the availability of an antibody rapid blood test, Standard Q COVID-19 IgM/IgG Rapid Test, which is intended to be administered at the point of care. The test, rolled out during the end of the first quarter, is likely to have contributed to the second quarter’s top line on robust adoption.

The Zacks Consensus Estimate for second-quarter North American Medical revenues is pegged at $805 million, suggesting an 18.7% uptick from the year-ago reported figure. The consensus estimate for International Medical revenues is pinned at $21.1 million, indicating a 10% rise from the prior-year reported number.

Technology and Value-Added Services Business

In the first quarter, the company’s technology and value-added services business sales were strong internationally, driven by positive trends in recurring revenue associated with Henry Schein’s practice management, patient engagement and patient demand creation software solutions as well as strong financial services revenue led by practice brokerage transactions in the U.K. This trend is likely to have continued in the second quarter, as the company continued to help customers identify practice management's opportunities over the past few months. This has led to an improvement in daily procedural volume and increase in tailor-made solutions production.

Further, Henry Schein is expected to have continued benefiting from the acquisitions of Elite Computer Italia and Lighthouse 360 (closed in July and March 2019, respectively).

However, we anticipate that during the second quarter certain Henry Schein One products to have witnessed a more pronounced impact on this segment compared to the first quarter from COVID-19 due to the continued fall in patient traffic since mid-March.

The Zacks Consensus Estimate for second-quarter North American Technology and Value-Added Services revenues is pegged at $116 million, suggesting a 6.4% uptick from the year-ago reported figure. The consensus estimate for international Technology and Value-Added Services revenues is pegged at $19.7 million, implying a 19% rise from the year-ago reported figure.

The Estimate Picture

For second-quarter 2020, the Zacks Consensus Estimate for total revenues of $1.40 billion implies a decline of 42.7% from the prior-year reported figure. Also, the consensus estimate for loss per share is pegged at 15 cents against earnings of 84 cents in the year-ago quarter.

What Our Model Suggests

Our proven model predicts an earnings beat for Henry Schein this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat.

Zacks Rank: The company currently carries a Zacks Rank #3.

Earnings ESP: Henry Schein has an Earnings ESP of +38.98%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Other Stocks Worth a Look

Here are a few other medical stocks worth considering as these also have the right combination of elements to beat on earnings this reporting cycle. All the stocks currently carry a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Integra LifeSciences Holdings Corporation IART has an Earnings ESP of +20.69%.

Exact Sciences Corporation EXAS has an Earnings ESP of +6.69%.

IDEXX Laboratories, Inc. IDXX has an Earnings ESP of +18.14%.

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