Can Dental Growth Drive Henry Schein's (HSIC) Q4 Earnings?

Henry Schein, Inc. (NASDAQ:HSIC) is expected to report fourth-quarter 2018 results on Feb 20. In the last reported quarter, the company’s earnings exceeded the Zacks Consensus Estimate by 1.98%. Overall, the metric surpassed estimates in three of the last four quarters, the average positive surprise being 1.8%.

Let’s see how things are shaping up prior to this announcement.

Factors at Play

Over the last few quarters, Henry Schein demonstrated solid growth across all the segments, namely, Dental, Medical and Technology plus Value-Added Services. Geographically, the company gained traction across all regions. We expect this trend to reflect in the impending quarterly results.

Favorable Dental Business Trend: The company’s strategy to expand digital dentistry globally is encouraging. In this regard, management believes that the company is well-positioned to benefit from the ongoing trend of digitalization in the international dental market.

Expanding the portfolio, last October, Henry Schein announced a new exclusive distribution agreement with Sprig Oral Health Technologies Inc. to distribute Sprig's products for crown placement.

Henry Schein, Inc. Price and EPS Surprise

Henry Schein, Inc. Price and EPS Surprise | Henry Schein, Inc. Quote

Management seems to be encouraged by the positive feedback for the SLX Clear Aligner System from the Key Opinion Leaders and other market participants.

We expect encouraging top-line contributions from these developments in the yet-to-be reported quarter.

Furthermore, we are upbeat about management’s expectations about the sustained dental equipment and consumables business growth in North America and other regions. The bullish trend is expected to reflect in the to-be-reported quarter results. Accordingly, the Zacks Consensus Estimate for North American dental revenues in the fourth quarter is pegged at $1.06 billion, reflecting a 2.9% year-over-year rise. Our consensus estimate for fourth-quarter global Dental revenues is pegged at $671 million, indicating a 3.9% rise from the year-ago quarter.

Strong Technology and Value-Added Services Business: The company is steadily progressing with launches within this business. We are particularly looking forward to Henry Schein’s joint venture (JV) with Internet Brands on dental technology to form Henry Schein One. The JV combines Henry Schein Practice Solutions' products and services with the dental businesses of Internet Brands. Last September, Henry Schein One announced the launch of Dentrix G7, the upgraded version of the dental practice management system. It also launched OmniCore, an all-in-one network infrastructure solution providing hardware and services required to meet dental practices' IT needs, in the same month.

Furthermore, the to-be-reported quarter’s results are expected to benefit from Henry Schein One’s additional launches like Dentrix Smart Image, enhanced Dentrix service bundles including Optimum Pro for payment management services and Ultimate Service Bundle, online booking for Dentrix and Dentrix Ascend and the Dentrix Ascend Quick Exam module. The company has also launched the Dentrix Ascend in the United Kingdom. We also look forward to updates on the company’s plans to launch patient relationship management platform in the fourth quarter of 2018.

Growing Medical Business: Henry Schein is consistently working on boosting its Medical segment. Notably, worldwide Medical revenues rose 4.5% year over year in the third quarter. We expect to see another quarter of strong organic growth from the existing customer base and patient traffic. We are also upbeat about the company making the Henry Schein EasyOne Air spirometer available at the end of the second quarter of 2018. We also look forward to the company’s agreement with Welch Allyn to distribute the Spot Vision Screener in last September.

Meanwhile, Henry Schein has completed the spinoff of its global Animal Health business in February 2019. However, the company will include the performance of the segment in the fourth-quarter results.

What Our Model Suggests

According to the Zacks model, a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has a good chance of beating estimates if it also has a positive Earnings ESP. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Henry Schein has a Zacks Rank #3 and an Earnings ESP of 0.00%, a combination that does not conclusively show an earnings beat.

The Zacks Consensus Estimate for earnings of $1.11 reflects a 14.4% rise on a year-over-year basis.

Stocks Worth a Look

Here are a few stocks worth considering as they have the right combination of elements to post an earnings beat in their upcoming quarterly results.

Masimo Corporation (NASDAQ:MASI) has an Earnings ESP of +1.04% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

CVS Health Corporation (NYSE:CVS) has an Earnings ESP of +3.29% and a Zacks Rank #3.

Wright Medical Group N.V. (NASDAQ:WMGI) has an Earnings ESP of +58.24% and a Zacks Rank #2.

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