Henry Schein (HSIC) Q4 Earnings and Revenues Top Estimates

Henry Schein, Inc. HSIC reported adjusted earnings per share (EPS) from continuing operations of 97 cents in the fourth quarter of 2019, up 8.9% year over year. Adjusted EPS beat the Zacks Consensus Estimate by 6.6% on revenue growth across each of its operating segments.

On a reported basis, EPS from continuing operations was $2.25, showing a stupendous increase of 192.2% on a year-over-year basis primarily due to a net gain on the sale of equity investments.

For 2019, adjusted EPS was $3.51, up 10.7% from the year-ago period. The bottom line beat the Zacks Consensus Estimate by 1.7%.

Revenues in Detail

Henry Schein reported net sales of $2.67 billion in the fourth quarter, up 8.1% year over year. The metric beat the Zacks Consensus Estimate by 1.1%. The year-over-year improvement came on the back of 5.8% internal sales growth in local currencies along with acquisition growth of 3.1%. Unfavorable foreign currency exchange made a 1% impact on the top line.

Excluding product sales to Covetrus under the transition services agreement related to Henry Schein’s Animal Health spin-off, normalized internal sales growth in local currencies was 4.9%.

 

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

 

For 2019, revenues totaled $9.98 billion, up 6.1% from the year-ago period. The top line beat the Zacks Consensus Estimate by 0.3%.

In the quarter under review, the company recorded sales of $1.95 billion in the North American market, up 8.2% year over year. Sales totaled $721.1 million in the international market, up 7.2% year over year.

Segment Analysis    

Henry Schein derives revenues from four operating segments — Dental, Medical, and Technology and Value-added Services.

In the fourth quarter, the company derived $1.72 billion of global Dental sales, up 2.9% year over year. This includes 4.2% growth in local currencies and 1.3% adverse impact of foreign currency exchange. At local currencies, internally-generated sales grew 2.5% and acquisition growth was 1.7%.

Worldwide Medical revenues climbed 15.2% year over year to $788.7 million.  Internally-generated sales grew 10.2% and acquisition growth was 5%. The company did not face any impact from foreign currency exchange.

Revenues from global Technology and Value-added Services grew 20% to $137.1 million. This included 20.3% growth in local currencies and a 0.3% drop, owing to adverse currency translation.At local currencies, internally-generated sales grew 9.4% and acquisition growth was 10.9%, led by the contribution from Lighthouse 360.

Margin Trend

Gross profit increased 7.9% to $810.6 million in the reported quarter. Gross margin, however, remained flat year over year at 30.4%. Adjusted operating income improved 1.4% year over year to $194.7 million. However, adjusted operating margin contracted 47 bps to 7.3%.

Financial Position

The company exited 2019 with cash and cash equivalents of $106.1 million compared with $56.9 million at the end of 2018. Cumulative cash flow from continuing operations at the end of 2019 was $820.5 million compared with $450.9 million in the year-ago period.

During the quarter under review, Henry Schein repurchased 8.2 million shares of its common stock for approximately $525 million. At the end of the year, it had $275 million authorized for the repurchase of common stock.

2020 Guidance

The company has reaffirmed its adjusted EPS guidance for 2020. It expects adjusted EPS of $3.65 to $3.75, suggesting 4-7% growth from that reported in 2019. The guidance assumes no significant supply-chain disruption related to the Novel Coronavirus Disease 2019 (COVID-19) for certain infection control products. The Zacks Consensus Estimate for 2020 adjusted EPS is pegged at $3.71.

Our Take

Henry Schein exited 2019 on a solid note. The company saw a solid performance by each of its key operating businesses. Its strong share gains in the North American market raise optimism. Robust international performance by the company also instills optimism. Overall, year-over-year revenue growth is encouraging. Nonetheless, we are disappointed with the contraction in its operating margin.

Zacks Rank

Henry Schein currently has a Zacks Rank of 3 (Hold).

Earnings of Other MedTech Majors at a Glance

Some better-ranked stocks, which reported solid results this earnings season, are Stryker Corporation SYK, Accuray Incorporated ARAY and AmerisourceBergen (ABC.

Stryker delivered fourth-quarter 2019 adjusted EPS of $2.49, outpacing the Zacks Consensus Estimate by 1.2%. Revenues of $4.13 billion surpassed the consensus mark by 0.7%. The company carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Accuray reported third-quarter fiscal 2020 adjusted EPS of a penny, whereas the Zacks Consensus Estimate for loss was pegged at 7 cents. Net revenues of $98.8 million outpaced the Zacks Consensus Estimate by 0.3%. The company sports a Zacks Rank #1 at present.

AmerisourceBergen reported first-quarter fiscal 2020 adjusted EPS of $1.76, which beat the Zacks Consensus Estimate of $1.67 by 5.4%. The company, currently carrying a Zacks Rank #2, has an expected long-term earnings growth rate of 7.4%.

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