Balanced View Continues for Henry Schein - Analyst Blog

On Mar 07, 2014, we issued an updated research report on Henry Schein Inc. HSIC, a leading distributor of health care products and services across the globe. Despite challenging economic conditions, a competitive environment and currency headwinds, Henry Schein managed to post solid fourth-quarter 2013 results with both its top and bottom line steering ahead of the respective Zacks Consensus Estimate.

The year-over-year growth at both fronts is also indicative of the company's consistent growth via organic and inorganic means. We are, at the same time, encouraged by the global performance of the company during the fourth quarter. The stock currently carries a Zacks Rank #3 (Hold).

Henry Schein's adjusted EPS of $1.43 in the fourth quarter of 2013 increased 13.5% year over year beating the Zacks Consensus Estimate by 2.9%. Revenues rose 4.9% to $2.53 billion, exceeding the same benchmark by $1 billion.

Henry Schein is well positioned to gain from its extensive global foothold and diverse channel mix. Favorable market dynamics is a major growth catalyst going forward. We believe that high-growth avenues like the animal health market should benefit Henry Schein's growth profile. We are also encouraged to find that in spite of the austerity measures in Europe, Henry Schein continues to garner market share in the Dental segment.

In addition, the company's acquisition strategy helps it to pursue targets that provide access to additional product lines. In a bid to expand its dental group in Europe, in Feb 2014, Henry Schein acquired four distributors serving dentists and dental laboratories in France, the Netherlands and Belgium, from a Dutch company, Arseus NV.  Earlier, in January, the company also took over a French dental practice management software company from Arseus. According to Henry Schein, these businesses will strengthen its European Dental and Technology operations going forward.

However, on the flip side, the European economy and macroeconomic uncertainty remain as overhangs. Intense competition and currency headwinds warrant further caution. Moreover, as group purchasing organizations (GPO) gain prominence, pricing pressure is inevitable.

Other Stocks to Consider

Some better-ranked medical devices stocks that are worth a look are Align Technology Inc. ALGN, CR Bard Inc. BCR and Becton, Dickinson and Company BDX. All the three stocks carry a Zacks Rank #2 (Buy).