Will Henry Schein (HSIC) Deliver A Surprise In Q1 Earnings?

Henry Schein, Inc. (NASDAQ:HSIC) is expected to report first-quarter 2017 results on May 2, before the opening bell.

Last quarter, this renowned healthcare products and service distributor posted a positive earnings surprise of 2.17%. Encouragingly, Henry Schein’s earnings surpassed the Zacks Consensus Estimate in the past four quarters, at an average of 1.67%.

Let’s see how things are shaping up prior to this announcement.

Factors at Play

Henry Schein’s fourth-quarter 2016 results were quite impressive, recording growth across all four segments. The company also gained traction in North America and overseas markets. We expect Henry Schein to maintain the bullish trend in the first quarter.

Notably, Henry Schein recently inked an agreement with Rijuven, a developer of innovative digital medical devices. As per the deal, the former will sell Rijuven’s CardioSleeve to clients of medical practitioners. This is expected to expand Henry Schein’s portfolio of solutions to address cardiovascular diseases. Further, the company teamed up with AxiaMed to simplify the collection of patient payments and enhance revenue cycle management. All these are expected to boost the top line in the upcoming quarter.

Per management, the company expects to see growth in the global dental market in the coming quarters as well. The company is currently banking on digital dentistry, which is part of its strategic plan. Henry Schein is therefore busy promoting digital workflows for general dentistry as well as dental specialties.

On the flip side, Henry Schein’s year-over-year deterioration in gross and operating margin due to higher cost of sales and expenses is a matter of concern.

Meanwhile, as per recent market analysts, pricing pressure may continue to hamper the stock’s progress. The political and government involvement will remain a risk for health care companies over the long term, as they look for ways to control the rising costs of health care. Moreover, management expects macroeconomic uncertainties and currency fluctuations to dent results in the forthcoming quarter as well.

For the first quarter of 2017, there has been no change in estimate revisions over the last 30 days. The same has been observed in the magnitude of estimate revision, with earnings estimates remaining at $1.66 over the same time frame.

Earnings Whispers

Our proven model does not conclusively show that Henry Scheinis likely to beat estimates this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. However, that is not the case here, as you will see below.

Zacks ESP: Henry Schein has an Earnings ESP of 0.00%. That is because both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at 66 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Henry Schein’s Zacks Rank #3 increases the predictive power of ESP. However, the company’s 0.00% ESP makes surprise prediction difficult.

Meanwhile, we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Here are some companies you may consider as our model shows that they have the right combination of elements to post an earnings beat in the upcoming quarter:

Galectin Therapautics, Inc. (NASDAQ:GALT) has an Earnings ESP of +13.33% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Hill-Rom Holdings Inc (NYSE:HRC) has an Earnings ESP of +1.27% and a Zacks Rank #2.

Syros Pharmaceuticals, Inc. (NASDAQ:SYRS) has an Earnings ESP of +5.77% and a Zacks Rank #2.

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