Henry Schein, Inc. HSIC reported adjusted earnings per share (EPS) from continuing operations of 84 cents in the second quarter of 2019, up 10.5% year over year. Adjusted EPS beat the Zacks Consensus Estimate by 1.2% on revenue growth across global Medical and Technology and Value-added Services businesses.
On a reported basis, EPS from continuing operations was 78 cents, showing an 8.3% improvement on a year-over-year basis.
Revenues in Detail
Henry Schein reported net sales of $2.45 billion in the second quarter, up 5.6% year over year. The metric missed the Zacks Consensus Estimate by 1.2%. The year-over-year improvement came on the back of 3.5% internal sales growth in local currencies along with acquisition growth of 4.3%. The top line was adversely impacted by 2.1% owing to unfavorable foreign currency exchange.
Henry Schein, Inc. Price, Consensus and EPS Surprise
Henry Schein, Inc. price-consensus-eps-surprise-chart | Henry Schein, Inc. Quote
Excluding $23.9 million in corporate revenues from product sales to Covetrus under the transition services agreement related to Henry Schein’s Animal Health spin-off, normalized internal sales growth in local currencies was 2.4%.
In the quarter under review, the company recorded sales of $1.76 billion in the North American market, up 7.5% year over year. Sales totaled $683.8 million in the international market, up 1.4% year over year.
Henry Schein derives revenues from four operating segments: Dental, Medical and Technology and Value-added Services.
In the second quarter, the company derived $1.60 billion of global Dental sales, down 0.7% year over year. This includes 2.1% growth in local currencies and 2.8% adverse impact from foreign currency exchange. At local currencies, internally-generated sales increased 0.7% and acquisition growth was 1.4%.
Worldwide Medical revenues climbed 13.6% year over year to $697.6 million. Growth in local currencies was 13.8% while there was a 0.2% decline related to foreign exchange headwind.
Revenues from global Technology and Value-added Services grew 39.9% to $125.1 million. This included 41.2% growth in local currencies and 1.3% decrease owing to adverse currency movements.
Gross profit increased 6.8% to $767.4 million in the reported quarter. Gross margin expanded 34 basis points (bps) from the year-ago quarter to 31.4%.
The company reported a 7.3% rise in selling, general & administrative expenses to $593.2 million in the second quarter. However, adjusted operating income improved 5.2% year over year to $174.2 million. Adjusted operating margin contracted 3 bps to 7.1%.
The company exited second-quarter 2019 with cash and cash equivalents of $84.9 million, compared with $88.1 million at the end of the first quarter. Year-to-date net cash provided by operating activities from continuing operations was $298.8 million compared with 111.9 million in the year- ago period.
During the quarter under review, Henry Schein repurchased 1.2 million shares of its common stock for approximately $77 million. At the end of the second quarter, the company had $173 million authorized for repurchase of common stock.
The company reaffirmed its EPS guidance for 2019. It expects adjusted EPS in the range of $3.38-$3.50, reflecting 7-10% growth from 2018. The Zacks Consensus Estimate for 2019 adjusted EPS of $3.46 is within the guided range.
Henry Schein exited the second quarter of 2019 on a mixed note. The company saw solid performance by the global Medical and Technology and Value-added Services businesses during the second quarter. Henry Schein's strong share gains in the North American market raise optimism. Year-over-year revenue growth is also encouraging. Nonetheless, we are disappointed with the sluggish dental sales and the contraction in adjusted operating margin in the reported quarter.
Zacks Rank & Key Picks
Henry Schein currently carries a Zacks Rank #3 (Hold).
A few better-ranked companies, which posted solid results this earnings season, are Stryker Corporation SYK, Baxter International Inc. BAX and Intuitive Surgical, Inc. ISRG.
Baxter delivered second-quarter 2019 adjusted EPS of 89 cents, which surpassed the Zacks Consensus Estimate of 81 cents by 9.9%. Revenues of $2.84 billion beat the Zacks Consensus Estimate of $2.79 billion by 1.9%. The company holds a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Stryker delivered second-quarter 2019 adjusted EPS of $1.98, beating the Zacks Consensus Estimate by 2.6%. Revenues of $3.65 billion surpassed the Zacks Consensus Estimate by 1.4%. The company carries a Zacks Rank of 2.
Intuitive Surgical reported second-quarter 2019 adjusted EPS of $3.25, which beat the Zacks Consensus Estimate of $2.85. Revenues were $1.1 billion, surpassing the Zacks Consensus Estimate of $1.03 billion. The company sports a Zacks Rank #2.
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