Henry Schein Beats Earnings Estimates Despite Declining Profits, Announces Restructuring Plan and Increased Guidance
Henry Schein Inc. (HSIC), a leading distributor of healthcare products and services, reported mixed third-quarter results on Tuesday, exceeding earnings estimates but falling short on revenue expectations. The company’s adjusted earnings per share (EPS) came in at $1.22, a 7.6% year-over-year decline, but beat the consensus estimate of $1.17. However, revenue reached $3.17 billion, a slight increase of 0.4% compared to the previous year, missing the consensus forecast of $3.24 billion.
The company attributed the decline in profits primarily to lower sales of personal protective equipment (PPE), particularly due to decreased glove pricing, and the impact of foreign currency exchange rates. Despite these challenges, Henry Schein saw growth from acquisitions and new product launches, contributing to a 3.2% increase in sales from acquisitions. Internal sales, however, decreased by 2.6%, including a 0.4% decline from lower PPE sales.
Segment-wise, the global dental segment sales amounted to $1.9 billion, representing a 1.6% decrease. Conversely, medical segment sales rose by 2.9% to $1.1 billion, despite an internal decline of 4.8%. Technology and Value-Added Services sales increased by 5.1% to $0.2 billion, although internal sales declined by 1.1%.
Stanley Bergman, Chairman of the Board and CEO of Henry Schein, expressed confidence in the company’s market position, highlighting steady market share gains in dental and medical distribution businesses following last year’s cyber incident. He also emphasized the ongoing stability of the dental equipment business in North America and increased customer investment in Europe, Australia, and New Zealand. Notably, implant and endodontic products showed strong growth in Europe, Brazil, and North America following the successful launch of the BioHorizons Tapered Pro Conical implant in the U.S.
Restructuring Plan and Cost Savings
During the third quarter of 2024, Henry Schein incurred $48 million in restructuring costs. The company implemented a new restructuring plan aimed at achieving significant cost savings, with actions approved in the third quarter expected to generate over $50 million in annual run-rate savings. By the end of 2025, the company projects annual run-rate savings of $75 million to $100 million.
Increased Guidance and Positive Outlook
Despite the challenges, Henry Schein remains optimistic about its future prospects. CEO Bergman highlighted the positive financial results delivered by acquisitions made during the 2022 to 2024 strategic planning cycle, along with the success of new product launches. He also emphasized the company’s commitment to returning capital to shareholders through its share repurchase program.
Based on these factors, Henry Schein increased its non-GAAP EPS guidance for 2024. The company now expects 2024 sales growth of approximately 4%-5% over 2023, compared to the prior guidance of 4% – 6% growth. The company also raised its adjusted EPS guidance for 2024 to $4.74-$4.82, compared to the previous guidance of $4.70-$4.82 and the consensus estimate of $4.75.
Price Action
At the close of trading on Tuesday, HSIC stock was down 4.60% at $69.01.
Henry Schein’s mixed third-quarter results demonstrate the ongoing challenges faced by the healthcare sector, but the company’s restructuring plan, increased guidance, and continued focus on growth initiatives suggest a positive outlook for the future.
