Henry Schein Stock Hits New 52-Week High: What's Driving It?

Shares of Henry Schein, Inc. HSIC reached a new 52-week high of $73.25 on Feb 18, before closing the session marginally lower at $72.99. The stock has rallied 7.8% since its third-quarter 2019 earnings announcement on Nov 5.

The company is witnessing an upward trend in its stock price, prompted by its impressive product lineup and partnerships. Its strong international performance in the last reported quarter also contributed to the top line. Further, solid performance by each of its key operating businesses in the third quarter 2019, backed by strong share gains in the North American market, boosted the market sentiment about its fourth-quarter results (to be released on Feb 20).

Let us delve deeper.

Recent Partnerships

Investors are upbeat about Henry Schein’s distribution agreement with Ivoclar Vivadent AG in December 2019 for the distribution of the new PrograMill One Milling System. Notably, this will add value to Henry Schein’s portfolio of digital dentistry solutions.

In January, Henry Schein also inked a partnership deal with United Parcel Service (UPS) to explore and test a variety of drone delivery use cases. The use cases would examine unmanned aerial vehicles within business-to-business operating models. Through the collaboration, Henry Schein will focus on exploring the possibility of transporting essential healthcare products by UPS to its customers.

Other Growth Drivers

Product Pipeline: Investors are optimistic about the company’s product pipeline, which includes new solutions, and product offerings like Amann Girrbach PL900S mill, Dentsply Sirona CEREC Primemill and Planmeca Emerald S Scanner. The products will be showcased in the upcoming Dental Meeting (to be held between Feb 20 and Feb 22, 2020).

Apart from these, the company’s product pipeline includes 3Shape TRIOS Move, 3Shape TRIOS 3 Basic, the A-dec 500 Chair, Convergent Dental Solea Dental Laser and Dentsply Sirona CEREC Primescan. All the above-mentioned products were demonstrated by the company in a meeting in December 2019. The opportunity to enhance clinician workflows through these products buoys optimism.

Further, through its joint venture with Internet Brands — Henry Schein One — the company announced the availability of the Dentrix Smart Image connector for DEXIS last November. The integration will enable oral health professionals to automate practice management with DEXIS software tightly woven into Dentrix workflows.

Q3 Performance: Following Henry Schein’s impressive third-quarter 2019 earnings show, investors are upbeat about its solid organic growth in the Medical sales business on the North American Rescue acquisition. Over the past few quarters, the company has been registering strong top-line results on Henry Schein One’s strong execution of innovation and product launch strategy. A promising 2019 guidance is also indicative that the solid momentum will continue.

Dental Business Trends: Henry Schein’s strategy to expand digital dentistry globally boosts market sentiment. The company is currently focusing on promoting digital workflows for general dentistry and dental specialties. It is also working toward offering a diversified portfolio and value-added services along with strengthening end market.

Downsides

Impact of Group Purchasing Organizations: Headwinds like measures to curb capital expenditure, volume headwinds, pricing pressure and procedure deferrals led to some large integrated health care providers and group purchasing organizations (GPO) to gain extensive purchasing power. The GPOs act as agents that negotiate vendor contracts on behalf of their members, thus raising the pricing pressure in the industry as a whole.

Competitive Landscape: Henry Schein currently operates in an industry, which is highly competitive, and consists of national, regional and local distributors as well as bigshots like McKesson Corp. Companies like Patterson Dental business of Patterson Companies Inc. and Benco Dental Supply pose stiff competition to Henry Schein in the North American dental products market.

Zacks Rank & Key Picks

Currently, the company carries a Zacks Rank #3 (Hold).

Some better-ranked stocks from the broader medical space are Phibro Animal Health Corp. PAHC, Hill-Rom Holdings, Inc. HRC and ResMed Inc. RMD.

Phibro currently sports a Zacks Rank #1 (Strong Buy) and has a projected long-term earnings growth rate of 2.1%. You can see the complete list of today’s Zacks #1 Rank stocks here.

Hill-Rom’s long-term earnings growth rate is estimated to be 11.1%. The company presently carries a Zacks Rank of 2 (Buy).

ResMed’s long-term earnings growth rate is expected to be 12%. It currently carries a Zacks Rank #2.

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