Henry Schein Rides High On Strategic Buyouts, Price Hurts
Zacks Investment Research | Jul 06, 2016 09:58PM ET
On Jul 5, we issued an updated research report on Melville, NY-based Henry Schein, Inc. ( (NASDAQ:HSIC) ), a leading distributor of health care products and services across the globe. The company currently carries a Zacks Rank #3 (Hold).
Henry Schein stands to gain from several trends in its end-markets, one of them being demographics.According to a recent estimation, between 2015 and 2025, the population of people aged 45 and older is expected to grow approximately 12%. This demographic trend is expected to boost the utilization of dental and medical products distributed by the company.
Of late, Henry Schein has been focused on making prudent acquisitions as part of its expansion strategies. The company was virtually on an acquisition spree throughout 2015, which is expected to continue in 2016 as well. In this regard, the latest development includes the completion of its takeover of 50% interest in J Morita’s subsidiary, One Piece Corp. Henry Schein believes that the deal will expand its share in the Japanese dental market but will be neutral to its financial results.
Another buyout was that of RxWorks to boost the growing practice management software business. Henry Schein also boasts a strong cash balance position, which allows it to indulge in high-value acquisitions as well as share repurchase activities.
On the flip side, the recent emergence of group purchasing organizations (GPOs) and the consequent pricing pressure they are exerting on single healthcare providers like Henry Schein might hamper the latter’s business effectively.
Moreover, Henry Schein operates in the highly competitive U.S. healthcare products and service distribution industry, wherein the presence of other large players puts the company in a tight spot. Fluctuating currency rates and macroeconomic weaknesses are other threats to the stock.
Stocks to Consider
Some better-ranked medical stocks areNuVasive, Inc. (NASDAQ:NUVA) , Boston Scientific Corporation (NYSE:BSX) and ICU Medical, Inc. (NASDAQ:ICUI) . While NuVasive sports a Zacks Rank #1 (Strong Buy), both Boston Scientific and ICU Medical carry a Zacks Rank #2 (Buy).
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