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Henry Schein (HSIC) Q3 Earnings Top Estimates, 2021 EPS View Up

Strengthening demand in the global dental and medical markets drove Henry Schein's (HSIC) revenues in the third quarter.

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This story originally appeared on Zacks

Henry Schein, Inc. HSIC reported adjusted earnings per share (EPS) of $1.10 from continuing operations in the third quarter of 2021, reflecting a 6.8% rise year over year. Moreover, adjusted EPS surpassed the Zacks Consensus Estimate by 17%. The quarter’s adjustments exclude the impact of certain restructuring charges, and settlement and litigation costs, among others.

- Zacks

GAAP EPS in the third quarter was $1.15 versus the year-ago EPS of 99 cents.

Revenues in Detail

Henry Schein reported net sales of $3.18 billion in the third quarter, up 11.9% year over year. The metric beat the Zacks Consensus Estimate by 8%.

The year-over-year uptick included 7.2% internal growth in local currencies, 3.9% growth from acquisitions and 0.8% growth related to foreign currency exchange.

In the quarter under review, the company recorded sales of $2.43 billion in the North American market, up 13.8% year over year. Sales totaled $752.2 million in the international market, up 6.3% year over year.

The year-over-year revenue growth was primarily driven by strengthening demand in the global dental and medical markets.

Segment Analysis

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

In the third quarter, the company recorded $1.80 billion of global Dental sales, up 10.5% year over year. In local currencies, the segment’s revenues include internally-generated sales growth of 5.2%, 3.9% growth from acquisitions and 1.4% growth related to foreign currency exchange. Further, the internal growth in local currencies of 5.2% included an increase of 4.7% in North America and a rise of 5.9% internationally.

Henry Schein, Inc. Price, Consensus and EPS Surprise

Henry Schein’s uptick in overall dental sales performance reflects a continued recovery in patient traffic compared to pre-pandemic levels.

North America’s dental consumable merchandise’s internal sales in local currencies rose 3.9% whereas dental equipment internal sales in local currencies rose 7.8%. Internationally, dental consumable merchandise internal sales and dental equipment internal sales, both in local currencies, improved 1.3% and 23.9%, respectively.

Global Medical revenues surged 15.5% year over year to $1.20 billion. The segment’s revenues include 13.1% internal growth in local currencies and 2.4% growth from acquisitions. There was no impact related to foreign currency exchange.

Revenues from global Technology and Value-added Services rose 21.9% to $168.6 million. This included a rise of 6.3% in internal local currency sales, 14.7% growth from acquisitions and 0.9% improvement related to foreign currency exchange.

Margin Trend

In the reported quarter, gross profit totaled $912.1 million, reflecting a 20.9% uptick year over year. Gross margin expanded 214 basis points (bps) to 28.7%.

Selling, general and administrative expenses rose 25.4% to $701.5 million in the quarter under review.

Overall adjusted operating profit was $210.6 million, reflecting a rise of 8.2% year over year. Yet, adjusted operating margin contracted 23 bps year over year to 6.6%.

Financial Position

The company exited the third quarter of 2021 with cash and cash equivalents of $119.1 million compared with $167.2 million at the end of second-quarter 2021. Long-term debt for the company at the end of the third quarter of 2021 was $705.5 million compared with $706.5 million at the end of second-quarter 2021.

Cumulative net cash provided by operating activities from continuing operations till the end of the third quarter of 2021 was $432.9 million compared with net cash used by operating activities from continuing operations of $248.4 million in the year-ago period.

During the third quarter of 2021, the company repurchased shares of its common stock for a total of approximately $50 million.

2021 Guidance

Henry Schein has raised the guidance for 2021 adjusted EPS from continuing operations, which is now expected in the range of $4.27 to $4.35, suggesting growth of 44-46% compared with 2020. The earlier-provided expectation was at or above $3.85. The Zacks Consensus Estimate for the same is currently pegged at $4.32.

2022 Guidance

Henry Schein also introduced preliminary guidance for 2022 adjusted EPS from continuing operations, which is expected to be in mid-to-high single-digit growth over 2021.

Our Take

Henry Schein exited the third quarter of 2021 on a bullish note with better-than-expected results. The company saw robust performances by all three of its operating businesses. The company’s international performance was also impressive. Strengthening demand in the global dental and medical markets drove strong year-over-year increases in sales in the reported quarter. The company registered strong equipment growth in international markets with no significant delays. Overall dental sales reflect a continued recovery in patient traffic compared to the pre-pandemic levels. Expansion of the gross margins bodes well.

Meanwhile, continued pandemic-led challenges faced by the end markets in most geographies are concerning. The company’s inability to provide detailed financial guidance raises apprehensions.

Zacks Rank and Other Key Picks

Henry Schein currently carries a Zacks Rank #2 (Buy).

A few other top-ranked stocks in the broader medical space that have announced quarterly results are Medpace Holdings, Inc. MEDP, Thermo Fisher Scientific Inc. TMO and West Pharmaceutical Services, Inc. WST.

Medpace, currently carrying a Zacks Rank #1 (Strong Buy), reported third-quarter 2021 adjusted EPS of $1.29, surpassing the Zacks Consensus Estimate by 20.6%. Revenues of $295.57 million beat the Zacks Consensus Estimate by 1.2%. You can see the complete list of today’s Zacks #1 Rank stocks here.

Thermo Fisher Scientific reported third-quarter 2021 adjusted EPS of $5.76, which surpassed the Zacks Consensus Estimate by 23.3%. Revenues of $9.33 billion outpaced the Zacks Consensus Estimate by 12%. It currently carries a Zacks Rank #1.

West Pharmaceutical Services, carrying a Zacks Rank #2, reported third-quarter 2021 adjusted EPS of $2.06, which beat the Zacks Consensus Estimate by 13.2%. Revenues of $706.5 million outpaced the consensus mark by 3.2%.



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