Henry Schein Poised On Strategic Buyouts, Pricing Hurts

On Sep 1, 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 customer demographics. According to a recent estimation, between 2015 and 2025, the population aged 45 and older will likely 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 is virtually on an acquisition spree in the last couple of years. In this regard, the latest development is the company’s decision to buy an 80% ownership position in Marrodent, one of Poland's largest full-service dental distributors.

Earlier this year, the company acquired an 80.1% interest in Vetstreet, a leading provider of marketing solutions and health information analytics. Another important acquisition has been a 90% ownership stake in Dental Trey, an Italy-based distributor of dental consumable merchandise and equipment.

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 efficacy.

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 are Align Technology Inc. (NASDAQ:ALGN) , Derma Sciences Inc. (NASDAQ:DSCI) and Merit Medical Systems, Inc. (NASDAQ:MMSI) . All the three stocks carry a Zacks Rank #2 (Buy).

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