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Henry Schein (HSIC) to Report Q3 Earnings: What's in Store?

Henry Schein, Inc. HSIC is scheduled to report third-quarter 2020 results on Nov 2, before market open.

In the last-reported quarter, the company’s break-even earnings beat the Zacks Consensus Estimate of a loss of 16 cents. Over the trailing four quarters, its earnings outperformed the Zacks Consensus Estimate on all occasions, the average beat being 35%.

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

Factors to Note

Dental Business

As per Henry Schein’s August update, there has been gradual reopening of practices and increased patient traffic globally. This recovery trend is likely to have continued during the rest of the third quarter as well, thus boosting the top line.

Notably, the company’s global dental sales have significantly benefited from the growing sales of personal protective equipment (“PPE”) over the past few months as safety protocols remain a necessity in the dental practice space under the pandemic scenario. This momentum is likely to have boosted third-quarter dental sales, given the unrelenting spread of the pandemic. Management is optimistic about the dental consumable merchandise and equipment sales in the third quarter, which had surpassed the company’s expectations over the past few months. The optimism is rooted in the fact that practices are reopening and patients are returning to dentists for clinical care.

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 new product category is air management equipment, including extra oral suction devices and air purification systems. With the rising emphasis being placed on infection control and the safety of ambient air, the product is likely to have contributed robustly during the third quarter.

Henry Schein’s subsidiary ACE Surgical’s partnership with EnvisionTec (entered into in June) to package and sterilize 3D-printed nasal swabs used for COVID-19 testing is also expected to have significantly contributed to total revenues during the third quarter.

The company entered into an exclusive agreement with U.K.-based manufacturer of air purifier systems, Radic8, to distribute Radic8 Viruskiller in the United States and Canada in July. Another notable partnership of Henry Schein is the exclusive distribution agreement with Zyris Inc., completed in September, to distribute the latter’s full line of easy-to-use dental isolation products. These developments are expected to have contributed to the third-quarter sales.

The Zacks Consensus Estimate for third-quarter North American dental revenues is pegged at $881 million, suggesting a 7.5% fall from the year-ago reported figure. The consensus estimate for International Dental revenues is pegged at $518 million, implying a 12.8% fall from the prior-year reported number.

Medical Business

Henry Schein’s medical business is again expected to have recorded robust demand for its 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 healthcare professionals. This is likely to have driven the third-quarter top line.

Over the past few months, the company has benefited from increasing critical-care customers interaction in hospital settings or with their physicians online through telemedicine. In this regard, Medpod and Henry Schein Medical’s (Henry Schein’s U.S. medical business) web-based clinical decision support system VisualDx have gained importance over the past few months due to the pandemic. This is likely to have contributed to the third-quarter revenues. For investors’ note, Henry Schein, in July, announced that Henry Schein Medical was on track to integrate the web-based clinical decision support system VisualDx with Medpod’s telemedicine solutions.

Henry Schein’s antibody rapid blood test, Standard Q COVID-19 IgM/IgG Rapid Test, is likely to have continued to contribute to the third quarter’s top line on robust adoption.

The Zacks Consensus Estimate for third-quarter North American Medical revenues is pegged at $767 million, suggesting a fall of 19.4% from the year-ago reported figure. The consensus estimate for International Medical revenues is pinned at $20.8 million, indicating a 7.6% rise from the prior-year reported number.

Technology and Value-Added Services Business

Following a disappointing second quarter show on lower patient flow and lower year-over-year financial services revenue due to impacts on practice transitions and equipment leasing, the company has observed improvement in sales over the past few months. This is expected to drive the third quarter revenues within this segment.

Henry Schein One software sales are likely to have maintained its momentum that it recorded over the past few months with the resumption of dental practice operations.

Robust adoption of Henry Schein’s Ascend (its cloud-based solutions) and Dentrix Enterprise is expected to have contributed to the revenues during the to-be-reported quarter.

The Zacks Consensus Estimate for second-quarter North American Technology and Value-Added Services revenues is pegged at $113 million, suggesting a 5.8% decline from the year-ago reported figure. The consensus estimate for international Technology and Value-Added Services revenues is pegged at $16.2 million, implying a 5.5% fall from the year-ago reported figure.

The Estimate Picture

For third-quarter 2020, the Zacks Consensus Estimate for total revenues of $2.40 billion implies a decline of 4.2% from the prior-year reported figure.

The consensus estimate for earnings per share is pegged at 67 cents, implying a decline of 25.6% from the prior-year reported figure.

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.

Earnings ESP: Henry Schein has an Earnings ESP of +36.80%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

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

Other Stocks Worth a Look

Here are a few other medical stocks worth considering, as these too have the right combination of elements to beat on earnings this reporting cycle.

Cardinal Health, Inc. CAH has an Earnings ESP of +1.70% and it currently carries a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank stocks here.

IDEXX Laboratories, Inc. IDXX has an Earnings ESP of +0.35% and is a Zacks #2 Ranked stock.

Quidel Corporation QDEL has an Earnings ESP of +8.14% and it flaunts a Zacks Rank of 1 at present.

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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.

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