Henry Schein, Inc.’s HSIC joint venture, Henry Schein One, is driving strong growth in its core products and introducing new solutions. The company’s robust acquisition strategy helps it to pursue targets that provide access to additional product lines. Also, favorable long-term trends in the dental industry are poised to support its future growth. Meanwhile, the lingering impact of last year’s cyber incident as well as the impact of the GPOs (Group Purchasing Organizations) raises concerns for Henry Schein’s operations.

In the past year, this Zacks Rank #3 (Hold) stock has fallen 4.2% against the 3.7% growth of the industry and the 28.6% rise of the S&P 500 composite.

The leading distributor of healthcare products and services has a market capitalization of $9.12 billion. Henry Schein surpassed estimates in three of the trailing four quarters and missed the same in one, delivering an average earnings surprise of 2.85%.

Find the latest EPS estimates and surprises on Zacks Earnings Calendar.

Tailwinds for HSIC Stock

Strong Potential of Henry Schein One: Henry Schein’s dental software business, Henry Schein One, has been progressing well, driving robust gains across its core products, including practice management software, revenue cycle management, analytics and AI solutions. During the third quarter of 2024, the business practice management software and revenue cycle management products posted mid-single-digit growth, with the customer base for these solutions expanding 20% year over year.

Among notable developments, is the availability of a new cybersecurity solution, Adlumin Managed Detection and Response (MDR), which aims to help dental organizations better protect their businesses and sensitive healthcare data against growing cyber threats. Also, it introduced Eligibility Essentials and Eligibility Pro, two powerful tools designed to simplify the insurance eligibility process for dental practices and are available for Dentrix and Dentrix Ascend. Together, these developments should enable practices to attract patients and gain invaluable insights for refining patient management strategies and driving growth.

Image Source: Zacks Investment Research

Expansion Through Acquisitions and Partnerships: Henry Schein’s revenue growth has been consistently supported by niche acquisitions and partnerships. During the third quarter, Henry Schein acquired 100% of abc dental AG to expand in Switzerland. Additionally, in September 2024, the company entered into an agreement with the Swiss company, vVARDIS, to serve as the exclusive distributor of the latter’s drill-free Curodont Repair Fluoride Plus product to larger dental service organizations (DSOs) in the United States. Earlier this year, Henry Schein completed the acquisition of orthopedic player TriMed. With the integration of TriMed’s business, the company is able to provide a wide range of surgical solutions to the existing Integrated Delivery Networks and Ambulatory Surgery Center customers.

Favorable Dental Business Trends: As dentistry shifts toward integrating high-tech digital workflow systems, Henry Schein’s efforts to expand digital dentistry globally are encouraging. The company is aiming to deliver customized solutions leveraging market insights and technological advancements. Apart from this, it sells cost-effective consumable merchandise products and manufactures certain dental specialty products in implants, orthodontics and endodontics. Of late, the company is witnessing consistent demand for these implant systems and endodontic products and integrated software and services solutions. Further, Henry Schein is organically gaining shares in the Global Dental specialties market, with acquisitions leading to significant growth across oral surgical, endodontics and orthodontics product lines. The company is experiencing improving sales trends in the dental distribution businesses.

Concerns for Henry Schein Stock

Cyber Attack Leads to Sales Drop: The healthcare industry, in particular, has been targeted by threat actors seeking to undermine companies’ cybersecurity defensive measures. In October 2023, Henry Schein experienced a cybersecurity incident that mainly affected the operations of its North American and European dental and medical distribution businesses. The company continued to experience a residual impact of the cyber events relating primarily to decreased sales to episodic customers (customers with a less consistent demand), leading to a 2.6% decrease in internally generated local currency sales in the third quarter of 2024.

Impact of GPOs: The healthcare industry has been facing numerous headwinds, such as measures to curb capital expenditure, volume headwinds, pricing pressure and procedure deferrals, among others. In light of these facts, some large integrated healthcare providers and GPOs have gained considerable purchasing power. The GPOs act as agents that negotiate vendor contracts on behalf of their members. Moreover, the ongoing economic climate bolstered the bargaining power of GPOs. The GPOs have also increased pricing pressure in the industry. This might be a drag on Henry Schein’s business in the future.

HSIC Stock Estimate Trend

The Zacks Consensus Estimate for HSIC’s 2024 earnings per share (EPS) has remained constant at $4.77 in the past 30 days.

The Zacks Consensus Estimate for the 2024 revenues is pegged at $12.85 billion, indicating a 4.1% rise from the year-ago reported number.

Key Picks

Some better-ranked stocks in the broader medical space are Haemonetics HAE, Boston Scientific BSX and Phibro Animal Health PAHC.

Haemonetics has an earnings yield of 5.59% compared with the industry’s 1.35%. Haemonetics’ earnings surpassed the Zacks Consensus Estimate in three of the trailing four quarters and missed on one occasion, the average surprise being 2.82%. Its shares have fallen 11% against the industry’s 13.3% growth in the past year.

HAE carries a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Boston Scientific, carrying a Zacks Rank #2 at present, has a long-term estimated earnings growth rate of 13.8%. Shares of the company have surged 58.3% compared with the industry’s 13.4% growth. BSX’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 8.29%.

Phibro Animal Health, carrying a Zacks Rank #2 at present, has an estimated earnings growth rate of 36.1% for fiscal 2025 compared with the industry’s 11.6%. Shares of the company have risen 88.4% compared with the industry’s 13.4% growth over the past year. PAHC’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 25.47%.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Boston Scientific Corporation (BSX) : Free Stock Analysis Report

Henry Schein, Inc. (HSIC) : Free Stock Analysis Report

Haemonetics Corporation (HAE) : Free Stock Analysis Report

Phibro Animal Health Corporation (PAHC) : Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research