Wells Fargo sets Henry Schein stock at Equal-weight with $80 PT

On Friday, Wells Fargo (NYSE:WFC) initiated coverage of Henry Schein (NASDAQ:HSIC) shares with an Equal-weight rating and a price target of $80.00. The healthcare provider, currently valued at $9.68 billion, has shown strong momentum with a 13.3% return over the past six months. Stifel analysts cited the uncertain near-term outlook due to potential lower rate cuts and the impact of possible tariffs, which could lead to a slower-than-expected recovery for the company in 2025. Additionally, activist involvement demanding various changes at Henry Schein could complicate the bullish case for the stock.

The $80 price target set by Wells Fargo is based on approximately 11 times the estimated EBITDA for 2026, with the company currently generating $922 million in EBITDA. According to InvestingPro analysis, the stock appears slightly overvalued at current levels, trading at a P/E ratio of 31.85. The analysts expressed concern that while navigating the current economic uncertainties, management might face distractions that could affect the company's performance. The involvement of activists, who are pushing for significant changes within the company, adds another layer of complexity to the company's outlook.

Wells Fargo's analysts point out that while there are factors that could hinder Henry Schein's progress, they are initiating coverage with a neutral stance. The Equal-weight rating indicates that the analysts believe the stock could perform in line with the broader market or its sector peers over the near to medium term.

The forecast by Wells Fargo reflects a cautious approach to Henry Schein's stock, considering the potential challenges the company may face. The analysts underscored that the company's near-term prospects seem uncertain, which has influenced their decision to start with an Equal-weight rating rather than a more bullish or bearish stance.

Investors in Henry Schein will likely be watching closely to see how the company navigates the issues highlighted by Wells Fargo, including the economic factors and activist involvement. The company's ability to address these concerns effectively may be critical to its performance in the stock market going forward. Despite these challenges, InvestingPro data shows the company maintains a GOOD Financial Health Score of 2.73, with 8 additional key insights available to subscribers through the comprehensive Pro Research Report.

In other recent news, Henry Schein's fourth-quarter 2024 results fell short of expectations, with revenues of approximately $3.2 billion and earnings per share (EPS) of $1.19, not meeting the Street's projections. The company's EBITDA also did not reach the anticipated $280 million, settling at $270 million. Mizuho (NYSE:MFG) Securities responded by raising their price target for Henry Schein to $78, while maintaining a neutral stance. The company's 2025 outlook suggests revenue growth in the low to mid single-digit range, which is in line with market expectations, but projected EBITDA and EPS growth are below Street's expectations.

In further developments, investment firm KKR is set to make a 12% strategic investment in Henry Schein and will obtain two seats on its board of directors. This move is expected to influence investor sentiment and may counterbalance the impact of the less-than-stellar earnings report. In addition, Ananym Capital Management, an activist investor, plans to nominate up to six directors to the board of Henry Schein, signaling potential changes in the company's leadership structure.

These recent developments underscore the dynamic nature of Henry Schein's financial landscape. As the company navigates through these changes, it continues to demonstrate a commitment to shareholder value through an expansion of its share repurchase program, authorizing an additional $500 million for this initiative.

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