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Henry Schein posts $3.4 billion in sales; analysts underwhelmed

Two stock analysts call the medical products company's results weak; stock slides.

Henry Schein Inc., headquartered in Melville, recently spun

Henry Schein Inc., headquartered in Melville, recently spun off its animal products business. Photo Credit: Barry Sloan

Shares of Henry Schein Inc. fell 4.7 percent Wednesday after the Melville-based multinational reported tighter operating margins on net sales of $3.4 billion for the fourth quarter.

The company posted a net profit of $133 million, or 87 cents per diluted share, compared to a net loss of $8.5 million, or 6 cents per share, in the prior year's quarter.

In a conference call Wednesday morning, chief financial officer Steven Paladino said that operating margins contracted to 5.3 percent, almost 2 percentage points below the levels in 2017's fourth quarter.

The latest quarter's results, however, included costs for restructuring and the spinoff of its animal health business, he said.

Operating margin is a measure of how much profit a company makes on a dollar of sales after paying production costs, but before paying taxes and interest.

Analysts Ross Muken of Evercore ISI and Jeff Johnson of Robert W. Baird & Co. Inc., in separate research notes, described the fourth quarter results as weak and said the stock could lose ground.

Muken said a bright spot in the fourth quarter was the company's medical business, which delivers supplies to the offices of physicians.

Shares closed down Wednesday at $60.17. Twelve months ago the stock was at $53.31.

In the quarter ended Dec. 31, medical sales grew 7.5 percent, year over year, to $684.8 million.

Sales in the dental business, Henry Schein's largest, edged down 0.2 percent to $1.7 billion.

The earnings report comes less than two weeks after the provider of products to the offices of health care professionals spun off its animal health business into a new, publicly traded company, Covetrus Inc., based in Portland, Maine.

Henry Schein said it took a pretax charge of 17 cents per diluted share in the fourth quarter and 31 cents per diluted share for 2018 related to severance pay, facility closings and other costs as part of a previously disclosed restructuring program.

In the conference call, chairman and chief executive Stanley M. Bergman disclosed that the company had acquired a majority stake in one of the largest independent dental distributors in China.

"In 2018 we had approximately $60 million of dental sales in China and expect this to grow significantly in 2019 and beyond," he said. "We've been [in China] for almost a decade and feel very comfortable now that we have the right infrastructure ... to advance."

Henry Schein is the largest publicly traded Long Island company based on 2017 revenue of $12.5 billion. It has more than 18,000 employees in 31 countries.

On Wednesday it reported full-year 2018 sales of $13.2 billion, an increase of 5.9 percent. Excluding the animal health business, 2018 sales were $9.4 billion.

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