Henry Schein Gets Price Target Bump at Barrington

Henry Schein (HSIC) shares were lower on Tuesday, but that didn’t stop Barrington Research analysts from raising its price target on the stock after the company reported better-than-expected financial results.

The health care products company on Monday reported second-quarter adjusted earnings of $1.04 per diluted share, up from $0.88 a share last year and topping the $1.01 average estimate from analysts polled by Capital IQ. Revenue rose to $3.33 billion from $3.06 billion during the same quarter last year, beating consensus for $3.31 billion.

Management said the company expects a one-time pre-tax restructuring charge this year from $45 million to $55 million, or $0.22 to $0.27 a share, which includes severance pay, facility closing costs and other fees related to its restructuring plan.

Schein was also positive on the future as it revised its 2018 guidance to $4.06 to $4.14 a share, reflecting growth of 13% to 15% from the year earlier. Analysts had forecast earnings of $4.10 a share.

Barrington analysts said management’s outlook doesn’t take into account impact from the upcoming animal health spinoff and merger, which is expected to happen before the end of the year, and it doesn’t factor in any future mergers and acquisitions.

The firm said it maintained its outperform rating on the stock and increased its price target to $92 from $88. Net debt is pegged at about $2 billion a year from now, the researcher said.

“While several dental industry-related concerns remain (pricing, the long-term impact of DSOs, online competition becoming a bigger threat over time), Schein has a history of successfully adapting to changing markets and this quarter’s result in dental was just very, very solid,” said Barrington analysts, who arrived at their price target by attaching a 13 times multiple to their 2019 adjusted earnings estimate.