Yahoo Finance Henry Schein (HSIC) Q1 Earnings Miss, Operating Margin Dips
Henry Schein, Inc. HSIC registered adjusted earnings per share (EPS) of $1.21 in the first quarter of 2023, down 16% from the year-ago period’s adjusted EPS. The metric also missed the Zacks Consensus Estimate by 2.4%.
Revenues in Detail
Henry Schein reported net sales of $3.06 billion in the first quarter, down 3.7% year over year. The metric lagged the Zacks Consensus Estimate by 1%.
The year-over-year decline included a 3.7% internal decrease in local currencies, 1.4% growth from acquisitions and a 1.5% decline related to foreign currency exchange.
Henry Schein, Inc. Price, Consensus and EPS Surprise
Henry Schein, Inc. price-consensus-eps-surprise-chart | Henry Schein, Inc. Quote
Sales of personal protective equipment (PPE) and COVID-19 test kits in the first quarter were $201 million, compared with $488 million in the prior-year period. Excluding sales of PPE and COVID-19 test kits, first-quarter internal sales growth in local currencies was 6.3% year over year.
In the quarter under review, the company recorded sales of $2.26 billion in the North American market, down 6.2% year over year. Sales totaled $799 million in the international market, up 4% year over year.
Segmental Analysis
Henry Schein derives revenues from three operating segments — Dental, Medical and Technology and Value-added Services.
In the first quarter, the company recorded $1.9 billion in global Dental sales, up 3.8% year over year. The segment’s revenues included an internally generated sales increase of 4% in local currencies and 2.3% growth from acquisitions. The business registered a 2.5% decline related to foreign currency exchange.
Global Medical revenues declined 17.2% year over year to $1 billion. The segment’s revenues included an internally generated sales decline of 17.1% in local currencies and a 0.1% decline related to foreign currency exchange.
Revenues from global Technology and Value-added Services rose 6.8% to $191 million. The figure included 6.5% internal sales growth in local currencies, 1.5% growth from acquisitions and a 1.2% decline related to foreign currency exchange.
Margin Trend
In the reported quarter, the gross profit totaled $966 million, reflecting a 0.7% decrease year over year. However, the gross margin expanded 96 basis points (bps) to 31.6%.
SG&A expenses rose 5.1% to $717 million in the quarter under review.
The adjusted operating profit in the first quarter was $249 million, reflecting a fall of 14.4% year over year. Meanwhile, the adjusted operating margin contracted 102 bps year over year to 8.1%.
Financial Position
Henry Schein exited the first quarter of 2023 with cash and cash equivalents of $126 million, compared with $117 million at the end of 2022. The long-term debt of the company at the end of the first quarter was $1.02 billion compared with $1.04 billion at the end of 2022.
The cumulative net cash provided by operating activities at the end of the first quarter of 2023 was $27 million compared with $93 million in the year-ago period.
In the first quarter of 2023, HSIC repurchased nearly 1.2 million shares of its common stock for $100 million. The company had approximately $415 million authorized and available for future stock repurchases by the end of the reported quarter.
2023 Guidance
Henry Schein updated its guidance for 2023. The outlook considers the current continuing operations and completed acquisitions, including the recently closed Biotech Dental buyout.
For 2023, the company expects adjusted EPS in the range of $5.18-$5.35 (from the previously-projected range of $5.25-$5.42), excluding the amortization expense of acquired intangible assets. This implies growth of (4%) to (1%) compared with the earlier projected growth of (2%) to 1% from the 2022 reported figure. The Zacks Consensus Estimate for the metric is currently pegged at $5.32.
For 2023, Henry Schein expects sales growth of nearly 1%-3% compared to the 2022 figure (unchanged from the previous guidance). The Zacks Consensus Estimate for revenues is currently pegged at $12.84 billion.
Our Take
Henry Schein ended the first quarter of 2023 with lower-than-expected earnings and revenues. However, results reflected good earnings momentum in the company’s core businesses.
HSIC’s Technology and Value-added Services business witnessed strong growth in North America, led by customers’ upgradation from the Easy Dental product to cloud-based solutions — Dentrix and Dentrix Ascend. Within the Dental segment, patient traffic remained stable, with robust sales of traditional dental equipment. The company is also progressing well in its BOLD +1 Strategic Plan, instilling investors’ optimism.
Meanwhile, lower sales of PPE and COVID-19 test kits, acquisition-related expenses and foreign exchange headwinds continued to affect the top line. Mounting operating expenses resulting in the contraction of HSIC’s adjusted operating margin are worrisome.
Zacks Rank & Key Picks
Henry Schein currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the broader medical space that have announced quarterly results are Edwards Lifesciences Corporation EW, Intuitive Surgical, Inc. ISRG and Johnson & Johnson JNJ.
Edwards Lifesciences, carrying a Zacks Rank #2 (Buy), reported a first-quarter 2023 adjusted EPS of 62 cents, beating the Zacks Consensus Estimate by 1.6%. Revenues of $1.46 billion outpaced the consensus mark by 4.7%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Edwards Lifesciences has a long-term estimated growth rate of 6.8%. EW’s earnings surpassed estimates in two of the trailing four quarters, missed the same in one and broke even in the other, the average being 1.2%.
Intuitive Surgical, having a Zacks Rank #2, reported a first-quarter 2023 adjusted EPS of $1.23, which beat the Zacks Consensus Estimate by 3.4%. Revenues of $1.70 billion outpaced the consensus mark by 6.9%.
Intuitive Surgical has a long-term estimated growth rate of 13%. ISRG’s earnings surpassed estimates in two of the trailing four quarters and missed the same in the other two, the average being 1.9%.
Johnson & Johnson reported first-quarter 2023 adjusted earnings of $2.68 per share, beating the Zacks Consensus Estimate by 6.8%. Revenues of $24.75 billion surpassed the Zacks Consensus Estimate by 5%. It currently carries a Zacks Rank #2.
Johnson & Johnson has a long-term estimated growth rate of 5.5%. JNJ’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 3.9%.
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