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Henry Schein Rides High on Acquisitions amid Currency Woes

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On Feb 11, 2016, we issued an updated research report on Henry Schein Inc.HSIC . The New York-based globally acclaimed distributor of health care products and services currently serves a vast global distribution network with a selection of over 110,000 branded products.

Henry Schein ended 2015 on an impressive note, with its fourth-quarter results squarely exceeding the Zacks Consensus Estimate. The year-over-year gross margin deterioration was however disappointing.

Henry Schein, with its huge network of distribution centers, boasts a strong geographical presence in various significant economies across the globe and continues to expand its realm further through vital investments. With its recent agreement to take over Dental Cremer of Brazil, Henry Schein has taken a step ahead toward expanding its business in the emerging markets of South America.

Acquisitions have been an important strategic driver at Henry Schein to expand its business globally and ramp up revenue growth. The company's recently completed Dental Trey buyout is expected to favorably leverage its existing dental business in Italy, by virtue of a solid product portfolio and long-term customer relationship. More recently, the company acquired RxWorks, a practice management software company, in a bid to expand its customer base in Australia, New Zealand, the UK and the Netherlands.

Additionally, in the fourth quarter of 2015, the company signed a non-exclusive agreement with molecular diagnostics provider Cepheid to distribute the latter's GeneXpert System, which, to date, has been largely targeted and made available to U.S. hospital labs.

In Jan 2016, Henry Schein acquired an 80.1% interest in Vetstreet - a leading provider of marketing solutions and health information analytics. The company expects this transaction to meaningfully complement its U.S. Animal Health business and be accretive to its earnings by 1-2 cents in 2017 and beyond.

On the flip side, unfavorable foreign currency continued to hamper the company's overseas business due to the consistent appreciation of the U.S. dollar. In the reported quarter, unfavorable foreign currency exchange accounted for a decline of 4.8% in overall revenue growth.

Foreign currency exchange also had a negative impact of 7 cents per share on EPS in the fourth quarter. In fact, the picture has been the same all through 2015. We are wary that such lingering macroeconomic softness might hamper Henry Schein's growth, going ahead. Lastly, a tough competitive landscape and pricing pressure also weigh on the stock.

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

Key Picks in the Sector

Some top-ranked stocks in the medical sector are Edwards Lifesciences Corp. EW , Exactech Inc. EXAC and Luminex Corporation LMNX . All the three stocks sport a Zacks Rank #1 (Strong Buy).

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HENRY SCHEIN IN (HSIC): Free Stock Analysis Report

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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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