Henry Schein (HSIC) Tops Q1 Earnings, Lowers '24 Sales View

Henry Schein, Inc. HSIC registered adjusted earnings per share (EPS) of $1.10 in the first quarter of 2024, down 9.1% from the year-ago period’s adjusted EPS. However, the metric exceeded the Zacks Consensus Estimate by 11.1%.

Revenues in Detail

Henry Schein reported net sales of $3.17 billion in the first quarter, up 3.7% year over year. The metric lagged the Zacks Consensus Estimate by 1.8%. The year-over-year upside reflects an internal sales decline of 1.8%.

On a geographic basis, the company recorded sales of $2.31 billion in North America, up 2% year over year. However, this missed our model’s projected growth of 3.4% year over year.

Sales totaled $866 million in the International market, up 8.4% year over year. Our model projected sales to improve 10.8%.

Segmental Analysis

Henry Schein derives revenues from two operating segments — Health Care Distribution (includes the global Dental and Medical businesses) and Technology and Value-Added Services.

In the first quarter, the company recorded $1.91 billion in global Dental sales, up 0.8% year over year. This compares with our model’s projected improvement of 5.5%.

Global Medical revenues improved 7.2% year over year to $1.04 billion. Our model projected the segment’s revenues to increase 4.9% from last year’s comparable figure.

Henry Schein, Inc. Price, Consensus and EPS Surprise

Henry Schein, Inc. Price, Consensus and EPS Surprise

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

Revenues from global Technology and Value-Added Services rose 13.6% to $217 million. The metric surpassed our model’s projected year-over-year improvement of 5.8%.

Margin Trend

In the reported quarter, the gross profit totaled $1.01 billion, reflecting a 4.8% increase year over year. The gross margin expanded 34 basis points (bps) to 31.9% despite a 3.2% jump in the cost of sales.

SG&A expenses rose 10.3% to $791 million in the quarter under review. The adjusted operating profit in the first quarter was $221 million compared with $249 million in the year-ago period. Meanwhile, the adjusted operating margin contracted 117 bps year over year to 7%.

Liquidity Position

Henry Schein exited the first quarter of 2024 with combined cash and cash equivalents of $159 million compared with $171 million at the end of 2023.

Cumulative net cash provided by operating activities at the end of the first quarter was $197 million compared with the year-ago figure of $27 million.

HSIC repurchased nearly one million shares of its common stock for $75 million during the quarter. The company had approximately $190 million authorized and available for future stock repurchases.

2024 Guidance

Henry Schein updated its financial outlook for 2024. The guidance assumes that present foreign currency exchange rates will generally prevail and end markets will remain consistent with current market conditions.

For 2024, the company expects adjusted EPS in the range of $5.00-$5.16 (unchanged), which suggests 11%-15% growth from the 2024 reported figure.  The Zacks Consensus Estimate for the metric is currently pegged at $5.07.

Henry Schein expects 2024 sales growth of nearly 8%-10% (previously 8%-12%) compared with the reported figure in 2023.  The Zacks Consensus Estimate for revenues is currently pegged at $13.41 billion.

Our Take

Henry Schein ended the first quarter of 2024 with an earnings beat, while revenues missed estimates. The fall in the adjusted operating margin is disappointing. The internal sales decrease during the quarter reflected the residual impact of last year’s cyber incident as well as lower personal protective equipment (PPE) sales, primarily due to lower glove pricing. HSIC also tightened its expectations for 2024 total sales growth.

On a positive note, performance demonstrated a strong recovery from last quarter’s cyber incident, along with a gross margin expansion. Henry Schein continued to make good progress in executing the BOLD+1 Strategic Plan, while the contribution from recent acquisitions buoys optimism. A strong pipeline of new specialty products and software innovation should contribute to the year’s top-line performance.

Zacks Rank & Key Picks

Henry Schein currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks from the broader medical space are Medpace MEDP, ResMed RMD and Encompass Health Corporation EHC.

Medpace, sporting a Zacks Rank #1 (Strong Buy), reported a first-quarter 2024 EPS of $3.20, which beat the Zacks Consensus Estimate by 30.6%. Revenues of $511 million improved 17.7% from last year’s comparable figure. You can see the complete list of today’s Zacks #1 Rank stocks here.

Medpace has an estimated 2024 earnings growth rate of 26.5% compared with the industry’s 12.3%. The company’s earnings surpassed estimates in each of the trailing four quarters, the average being 12.8%.

ResMed, sporting a Zacks Rank #1, reported a first-quarter 2024 EPS of $2.13, which topped the Zacks Consensus Estimate by 10.9%. Revenues of $1.20 billion surpassed the Zacks Consensus Estimate by 1.9%.

RMD has an estimated fiscal 2024 earnings growth rate of 17.9% compared to the industry’s 15.7%. In each of the trailing four quarters, the company delivered an average earnings surprise of 2.8%.

Encompass Health, carrying a Zacks Rank #2 (Buy), reported a first-quarter 2024 adjusted EPS of $1.12, which surpassed the Zacks Consensus Estimate by 20.4%. Net operating revenues of $1.3 billion topped the Zacks Consensus Estimate by 3.6%.

EHC has an estimated long-term earnings growth rate of 15.6% compared with the industry’s 11.7% growth. The company’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 18.7%.

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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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