Yahoo Finance Here's Why You Should Retain Henry Schein (HSIC) Stock for Now
Henry Schein, Inc. HSIC is poised to experience growth in the coming quarters, backed by its encouraging strategy to expand digital dentistry globally. Niche acquisitions and partnerships have consistently fueled the company's revenue growth. Further, Henry Schein is upbeat about its dental technology joint venture (JV), Henry Schein One, which has been progressing well despite a challenging business environment.
Meanwhile, the impact of the cybersecurity incident on HSIC’s operations remains concerning. Macroeconomic challenges may also hinder its operations and international growth prospects.
In the past year, this Zacks Rank #3 (Hold) stock has decreased 13.9% against the 4.9% growth of the industry and the 22.5% rise of the S&P 500 composite.
The leading distributor of healthcare products and services has a market capitalization of $9.09 billion. The company’s earnings are expected to grow 12.7% in 2024 compared to the industry’s 7.5%. In the trailing four quarters, the company delivered an average negative earnings surprise of 0.83%.
Let’s delve deeper.
Tailwinds
Favorable Long-Term Trends for the Dental Business: The company is actively promoting digital workflows for general dentistry and dental specialties to offer a diversified portfolio and value-added services, along with a favorable end market. HSIC has been witnessing growing demand for its implant systems, endodontic products and integrated software and services solutions, which are generating strong growth by delivering greater efficiency and a better experience to its customers.
During the fourth quarter of 2023, Dental specialty product sales were driven by acquisitions and solid organic growth in implants and biomaterials. In response to the Cybersecurity incident, Henry Schein launched a replacement product during the fourth quarter, which is seeing strong market adoption. The company is bullish about the growth in its dental specialty products in 2024, with a robust pipeline of product innovations planned across various geographies in the first half of 2024. Sales growth is expected to continue to surpass market growth.
Business Expansion Through Acquisitions & Partnerships: The company’s robust acquisition strategy helps it pursue targets that provide access to additional product lines. In 2023, Henry Schein invested $995 million in business acquisitions to accelerate the implementation of its 2022-2024 BOLD+1 Strategic Plan, almost reaching $1 billion in capital investment in support of the plan.
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In December 2023, Henry Schein entered the extremity segment of the orthopedic market through an agreement to acquire a majority interest in TriMed and a strategic relationship with Extremity Medical. Moreover, with the addition of Shield Healthcare, Henry Schein’s homecare medical product platform will have a revenue base of more than $300 million in annualized revenues.
During the year, the company also completed the majority share acquisition of Biotech Dental, which increased the prospects of offering a seamless digital workflow solution. The company also acquired S.I.N. Implant System, entering Brazil's implant market.
Henry Schein One Holds Potential: The global growth of HSIC’s dental software business is being driven by the ongoing migration to its cloud-based practice management software solutions like Dentrix Ascend and Dentally, as well as revenue cycle management business growth from increased patient traffic driving a higher volume of e-claims. Core products within Henry Schein One, including practice management software, revenue cycle management, analytics and AI solutions, registered double-digit gains in the fourth quarter of 2023.
The company launched many digital clinical workflow solutions for its customers, including AI technologies, to provide its customers with highly effective diagnostic solutions. Moreover, product enhancements such as remote scheduling and payments are also contributing to growth. HSIC continues to see strong interest and good growth in Dentrix Ascend from its DSO customers and recently announced two new large multi-site Dentrix Ascend accounts.
Headwinds
Cyberattacks to Impede Growth: In October 2023, Henry Schein experienced a cybersecurity incident that primarily affected the operations of the North American and European dental and medical distribution businesses. The company’s precautionary actions, such as taking certain systems offline, led to temporary disruptions in its business operations.
Henry Schein estimated that the cybersecurity incident reduced 2023 fourth-quarter sales by $350 million to $400 million worldwide and negatively impacted the operating income by nearly $120 million to $130 million. The company is continuing to assess the impact of the incident on its business, anticipating some short-term residual effects on its financial results in 2024.
Economic Problems: The global macroeconomic environment, including exchange rate fluctuations, inflation and recession, is impacting Henry Schein's financial operations. Governments and insurance companies are seeking ways to contain healthcare costs, potentially affecting the company's cost of revenues and operating expenses. Additionally, fluctuating currency rates may potentially hinder growth in international markets, where Henry Schein generates a significant portion of its revenues.
Estimate Trend
The Zacks Consensus Estimate for HSIC’s 2024 earnings per share (EPS) has moved to $5.07 from $5.06 in the past 30 days.
The Zacks Consensus Estimate for the company’s 2024 revenues is pegged at $13.41 billion. This suggests an 8.7% rise from the year-ago reported number.
Key Picks
Some better-ranked stocks from the broader medical space are Inspire Medical Systems INSP, Insulet PODD and Exact Sciences EXAS.
Inspire Medical Systems’ earnings are expected to increase 51.4% in 2024 compared with the S&P 500’s 17.1%. INSP’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 353.6%. Its shares have declined 15.6% compared with the industry’s 19.7 fall in the past year.
INSP sports a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Insulet, carrying a Zacks Rank #2 (Buy) at present, has an estimated long-term earnings growth rate of 18.1% compared with the industry’s 11.4%. Shares of the company have decreased 46.2% compared with the industry’s 1.3% fall over the past year.
PODD’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 100.1%. In the last reported quarter, it delivered an average earnings surprise of 108.9%.
Exact Sciences, carrying a Zacks Rank #2 at present, has an estimated earnings growth rate of 23.8% for 2024 compared with the industry’s 13.1%. Shares of EXAS have dropped 2.4% compared with the industry’s 17% decrease over the past year.
EXAS’ earnings surpassed estimates in each of the trailing four quarters, the average surprise being 51.5%. In the last reported quarter, it delivered an average earnings surprise of 49.1%.
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Henry Schein, Inc. (HSIC) : Free Stock Analysis Report
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