Henry Schein (HSIC) reported an EPS of $1.00 in the fourth quarter of fiscal 2010, surpassing the Zacks Consensus Estimate of 96 cents. The EPS was also 7.5% higher than the year-ago period’s adjusted EPS of 93 cents. For the full year, the company reported an adjusted EPS of $3.58, 11.9% higher than the previous year’s $3.20 and surpassing the Zacks Consensus Estimate of $3.55.
Henry Schein reported a 13.3% rise in net sales to reach $2 billion, consisting of a 15% growth in local currency, partially offset by a 1.7% decline associated with foreign currency. Revenues beat the Zacks Consensus Estimate marginally. For 2010, revenues came in at $7.5 billion, 15.1% higher than the previous year and marginally beating the Zacks Consensus Estimate.
Henry Schein derives revenues from dental, medical, animal health, international and, technology and value added services. These divisions accounted for 36% ($720.7 million), 16% ($327.7 million), 11% ($222.7 million), 34% ($695 million) and 3% ($57.5 million), respectively, of total revenue during the quarter.
The largest segment at Henry Schein, North American Dental, recorded a 7.3% increase in sales driven by 6.7% growth in local currencies coupled with 0.6% growth in foreign exchange. During the quarter, the 9.7% rise in dental consumable merchandise sales marks the fifth consecutive quarter of higher sales in local currencies. Moreover, sales growth of dental equipments in all the four quarters of 2010 has been commendable given the strong equipment sales in last year’s fourth quarter.
The 5.7% growth in medical sales to some extent was due to sales of seasonal influenza vaccines, although the impact was more during the third quarter of 2010. Excluding the impact from both the periods, North American medical sales increased 7.1%. During the quarter, Henry Schein had sold 1.3 million doses of seasonal influenza vaccines taking the full year level to 12.5 million doses keeping in line with the expectation. In addition, the 282.2% increase in animal health sales reflects the combined effect of Butler Schein animal health business.
Revenues derived from the international market declined 0.6% from the year-ago period consisting of a 4.4% growth in local currency, partially offset by a negative impact of 5% from foreign currency. We note that Henry Schein has witnessed a strong growth in its dental business, especially dental equipments.
Gross margin declined 110 basis points to 28.4% due to a 15% rise in cost of sales (more than revenues). Moreover, an 11% growth in selling, general and administrative expenses led to lower operating margin (60 basis points to 7%).
Henry Schein exited 2010 with cash and cash equivalents of $150.3 million, a 68% decline from $471.15 million at the end of 2009. During the reported quarter, the company repurchased 919,698 shares at $57.54 per share and was left with $100 of authorization.
Henry Schein reiterated its guidance for fiscal 2011. It expects EPS of $3.88−$3.98, reflecting an annualized growth of 8%−11%.
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