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Here's Why You Should Retain Henry Schein (HSIC) Stock for Now

Henry Schein, Inc. HSIC continues to witness market share gains within its core businesses. The company’s strategic placement of distribution centers worldwide gives a competitive edge in the industry. Henry Schein One is also gaining from the ongoing shift to Dentrix Ascend and Dentally cloud-based solutions.

However, macroeconomic challenges might hinder its operations and international growth prospects.

In the past year, this Zacks Rank #3 (Hold) stock has gained 8.7% compared with the 9.1% growth of the industry and a 18.6% rise of the S&P 500 composite.

The leading distributor of healthcare products and services has a market capitalization of $9.57 billion. The company’s earnings are expected to rise 7.5% in 2024.

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Let’s delve deeper.

Tailwinds

Widespread Network and Channel Mix: Henry Schein strategically set up distribution centers worldwide to better serve customers and increase its operating efficiency.

Following last year's cyber incident, the dental and medical distribution businesses in North America and Europe showed a good pace of recovery. In the first quarter of 2024, the company’sTechnology and Value-Added service sales increased 13.8% from the prior-year quarter’s levels. The upside was primarily driven by value-added services, while international growth was bolstered by the Dentally cloud-based solution.

Henry Schein One Holds Potential: HSIC is upbeat about its dental technology joint venture (JV), Henry Schein One. The dental software business has been progressing well, driving its most core products — including practice management software, revenue cycle management, analytics and AI solutions.

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Zacks Investment Research

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Throughout last year, global growth in Henry Schein One was driven by the migration to its cloud-based practice management software solutions, Dentrix Ascend and Dentally. The customer base for these solutions expanded by 36% in the first quarter compared with the prior year’s tally, totaling approximately 8,000 cloud-based systems installed.

Expansion Through Acquisitions and Partnerships: Henry Schein’s revenue growth has consistently been supported by niche acquisitions and partnerships.

In late December, Henry Schein marked its entry into the extremity segment of the growing orthopedic market through an agreement to acquire a majority interest in TriMed and a strategic relationship with Extremity Medical. The addition of a homecare medical products supplier, Shield Healthcare, expands the company’s existing medical business by delivering a diverse range of products, including items such as incontinence, urology, ostomy, enteral nutrition, advanced wound care and diabetes supplies.

Downsides

Tough Competition: The U.S. healthcare products and service distribution industry is highly competitive and consists principally of national, regional and local distributors. In the North American dental products market, the company faces stiff competition from Patterson Dental business of Patterson Companies Inc. and Benco Dental Supply. The competition in the fast-growing animal health market is also fierce, with Patterson Veterinary Supply under Patterson Companies and IDEXX Laboratories gaining traction.

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 cost of revenues and operating expenses.

Estimate Trend

The Zacks Consensus Estimate for HSIC’s 2024 earnings per share (EPS) has moved to $5.11 from $5.08 in the past 90 days.

The Zacks Consensus Estimate for the company’s 2024 revenues is pegged at $13.38 billion. This suggests an 8.5% rise from the year-ago reported number.

Key Picks

Some better-ranked stocks from the broader medical space are Medpace MEDP, ResMed RMD and Encompass Health Corporation EHC.

Medpace, sporting a Zacks Rank #1 (Strong Buy), reported first-quarter 2024 EPS of $3.20, beating the Zacks Consensus Estimate by 30.6%. Revenues of $511 million increased 17.7% from last year’s comparable figure. You can see the complete list of today’s Zacks #1 Rank stocks here.

Medpace has an estimated 2024 earnings growth rate of 26.5% compared with the industry’s 12.3%. The company’s earnings surpassed estimates in each of the trailing four quarters, the average being 12.8%.

ResMed, sporting a Zacks Rank #2 (Buy), reported first-quarter 2024 EPS of $2.13, which topped the Zacks Consensus Estimate by 10.9%. Revenues of $1.20 billion surpassed the Zacks Consensus Estimate by 1.9%.

RMD has an estimated fiscal 2024 earnings growth rate of 17.9% compared to the industry’s 15.7%. In each of the trailing four quarters, the company delivered an average earnings surprise of 2.8%.

Encompass Health, carrying a Zacks Rank #2, reported first-quarter 2024 adjusted EPS of $1.12, which surpassed the Zacks Consensus Estimate by 20.4%. Net operating revenues of $1.3 billion topped the Zacks Consensus Estimate by 3.6%.

EHC has an estimated long-term earnings growth rate of 15.6% compared with the industry’s 11.7% growth. The company’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 18.7%.

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ResMed Inc. (RMD) : Free Stock Analysis Report

Henry Schein, Inc. (HSIC) : Free Stock Analysis Report

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Encompass Health Corporation (EHC) : Free Stock Analysis Report

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