Henry Schein (NASDAQ:HSIC) Reports Sales Below Analyst Estimates In Q4 Earnings

Dental and medical products company Henry Schein (NASDAQ:HSIC) missed Wall Street’s revenue expectations in Q4 CY2024, but sales rose 5.8% year on year to $3.19 billion. Its non-GAAP profit of $1.19 per share was 1.6% below analysts’ consensus estimates.

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“Our fourth quarter financial results reflect relatively stable dental and medical end-markets. We continued to make progress on our 2022 to 2024 BOLD+1 Strategic Plan which we recently completed, exceeding our 2024 target of generating 40% of our worldwide operating income from high-growth, high-margin businesses,” said Stanley M. Bergman, Chairman of the Board and Chief Executive Officer of Henry Schein.

Company Overview

Founded in 1932, Henry Schein (NASDAQ:HSIC) is a distributor of healthcare products and services, offering a broad portfolio of medical, dental, and veterinary supplies.

Dental Equipment & Technology

The dental equipment and technology industry encompasses companies that manufacture orthodontic products, dental implants, imaging systems, and digital tools for dental professionals. These companies benefit from recurring revenue streams tied to consumables, ongoing maintenance, and growing demand for aesthetic and restorative dentistry. However, high R&D costs, significant capital investment requirements, and reliance on discretionary spending make them vulnerable to economic cycles. Over the next few years, tailwinds for the sector include innovation in digital workflows, such as 3D printing and AI-driven diagnostics, which enhance the efficiency and precision of dental care. However, headwinds include economic uncertainty, which could reduce patient spending on elective procedures, regulatory challenges, and potential pricing pressures from consolidated dental service organizations (DSOs).

Sales Growth

A company’s long-term performance is an indicator of its overall quality. While any business can experience short-term success, top-performing ones enjoy sustained growth for years. Regrettably, Henry Schein’s sales grew at a mediocre 4.9% compounded annual growth rate over the last five years. This was below our standard for the healthcare sector and is a rough starting point for our analysis.

We at StockStory place the most emphasis on long-term growth, but within healthcare, a half-decade historical view may miss recent innovations or disruptive industry trends. Henry Schein’s recent history shows its demand slowed as its revenue was flat over the last two years.

We can better understand the company’s sales dynamics by analyzing its organic revenue, which strips out one-time events like acquisitions and currency fluctuations that don’t accurately reflect its fundamentals. Over the last two years, Henry Schein’s organic revenue averaged 2.7% year-on-year declines. Because this number is lower than its normal revenue growth, we can see that some mixture of acquisitions and foreign exchange rates boosted its headline results.

This quarter, Henry Schein’s revenue grew by 5.8% year on year to $3.19 billion, missing Wall Street’s estimates.

Looking ahead, sell-side analysts expect revenue to grow 4% over the next 12 months. Although this projection implies its newer products and services will fuel better top-line performance, it is still below the sector average.

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Operating Margin

Henry Schein was profitable over the last five years but held back by its large cost base. Its average operating margin of 5.6% was weak for a healthcare business.

Analyzing the trend in its profitability, Henry Schein’s operating margin of 4.9% for the trailing 12 months may be around the same as five years ago, but it has decreased by 1 percentage points over the last two years. This dynamic unfolded because it struggled to adjust its fixed costs while its demand plateaued.

In Q4, Henry Schein generated an operating profit margin of 4.9%, up 3.6 percentage points year on year. This increase was a welcome development and shows it was recently more efficient because its expenses grew slower than its revenue.

Earnings Per Share

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

Henry Schein’s EPS grew at a decent 6.2% compounded annual growth rate over the last five years, higher than its 4.9% annualized revenue growth. However, this alone doesn’t tell us much about its business quality because its operating margin didn’t expand.

We can take a deeper look into Henry Schein’s earnings to better understand the drivers of its performance. A five-year view shows that Henry Schein has repurchased its stock, shrinking its share count by 14.6%. This tells us its EPS outperformed its revenue not because of increased operational efficiency but financial engineering, as buybacks boost per share earnings.

In Q4, Henry Schein reported EPS at $1.19, up from $0.66 in the same quarter last year. Despite growing year on year, this print slightly missed analysts’ estimates, but we care more about long-term EPS growth than short-term movements. Over the next 12 months, Wall Street expects Henry Schein’s full-year EPS of $4.74 to grow 5%.

Key Takeaways from Henry Schein’s Q4 Results

We struggled to find many positives in these results as the company missed across all key metrics. Its full-year EPS guidance also fell short of Wall Street’s estimates. Overall, this was a weaker quarter. The stock traded down 1.4% to $76.55 immediately following the results.

Henry Schein’s earnings report left more to be desired. Let’s look forward to see if this quarter has created an opportunity to buy the stock. What happened in the latest quarter matters, but not as much as longer-term business quality and valuation, when deciding whether to invest in this stock. We cover that in our actionable full research report which you can read here, it’s free.