Nucor earnings beat by $0.08, revenue fell short of estimates
Introduction & Market Context
Henry Schein Inc. (NASDAQ:HSIC) released its first quarter 2025 financial results on May 5, 2025, reporting modest earnings growth despite essentially flat sales compared to the same period last year. The healthcare products and services distributor delivered non-GAAP diluted earnings per share of $1.15, representing a 4.5% increase from $1.10 in Q1 2024, while total sales remained nearly unchanged at $3.17 billion.
The company’s stock closed at $65.30 on May 2, 2025, and was trading down 1.36% in premarket activity before the earnings call. This represents a significant decline from its 52-week high of $82.49, suggesting investors have been cautious about the company’s near-term prospects.
Quarterly Performance Highlights
Henry Schein reported modest financial improvements in the first quarter, with growth accelerating throughout the period. While total reported sales declined slightly by 0.1% to $3.17 billion, constant currency sales growth excluding PPE and COVID test kits reached 2.0%.
As shown in the following financial highlights slide:
The company’s adjusted EBITDA increased 1.7% to $259 million compared to $255 million in the prior-year period. Operating margin on a non-GAAP basis improved by 14 basis points to 7.25%, reflecting the company’s ongoing efforts to enhance profitability despite challenging market conditions.
The detailed consolidated results provide further context for the company’s performance:
Segment Performance Analysis
Henry Schein’s performance varied significantly across its three main business segments, with specialty products and technology outperforming the distribution business.
The Global Distribution and Value-Added Services Group, which represents the largest portion of the company’s business, saw constant currency sales growth of 1.5% after excluding PPE and COVID test kits. However, operating income for this segment declined to $167 million from $171 million in the prior year, primarily due to lower gross profit from reduced sales of practice transitions, partially offset by lower operating expenses resulting from the company’s restructuring program.
In contrast, the Global Specialty Products Group demonstrated stronger performance with constant currency sales growth of 4.3%, driven by the implant and biomaterial business as well as acquisition growth from TriMed. Operating income for this segment increased significantly to $56 million from $43 million in the prior year, with operating margin expanding by 340 basis points to 15.3%.
The Global Technology Group delivered the strongest margin performance, with operating income increasing to $42 million from $34 million in the prior year, representing 24% growth. Operating margin for this segment expanded by 430 basis points to 25.8%, reflecting strong expense management and growth in practice management systems, including Dentrix Ascend and Dentally.
Strategic Initiatives & M&A Activity
Henry Schein continues to execute its BOLD+1 Strategic Plan, which has been refreshed for 2025-2027. The company expects its high-growth, high-margin businesses to contribute over 50% of total operating income by 2027, with corporate brand products accounting for more than 10% of operating income.
A key component of this strategy is focused M&A activity, as illustrated in the following slide:
Recent acquisitions include Acentus ($35 million annual revenue), TriMed ($52 million annual revenue), and BIOTECH DENTAL ($106 million annual revenue), among others. These acquisitions are strategically aligned to expand the company’s presence in high-growth specialty and service businesses, while also strengthening its core distribution operations.
The company invested $51 million in acquisitions during Q1 2025, continuing its disciplined approach to external growth opportunities.
Capital Allocation & Balance Sheet
Henry Schein maintains a balanced approach to capital allocation, as demonstrated in this comprehensive overview:
The company generated $37 million in operating cash flow during Q1 2025 and maintained a debt-to-adjusted EBITDA ratio of 2.6x. Share repurchases remained a significant focus, with $161 million deployed during the quarter and $718 million remaining in the authorized repurchase program at the end of Q1.
Capital expenditures totaled $31 million in Q1, reflecting ongoing investments in operational infrastructure and technology. The company emphasized that its strong balance sheet positions it well to pursue attractive opportunities across its strategic priorities.
Forward-Looking Statements & Guidance
Despite the mixed results in Q1, Henry Schein maintained its full-year 2025 guidance, as detailed in the following slide:
The company continues to expect non-GAAP diluted EPS of $4.80 to $4.94 for the full year, with performance expected to be more heavily weighted toward the second half of 2025. Total (EPA:TTEF) sales growth is projected at 2% to 4% over 2024, with adjusted EBITDA expected to grow in the mid-single digits compared to the $1.1 billion reported in 2024.
Management noted that it is taking actions with suppliers and customers to mitigate the impact of the current tariff situation, which could potentially affect margins in certain product categories.
Looking beyond 2025, Henry Schein reaffirmed its commitment to its long-term financial goal of high-single-digit to low-double-digit earnings growth, viewing 2025 as a foundational year for returning to this growth trajectory.
The company continues to advance its BOLD+1 Strategy, with highlights including the expansion of its Home Solutions platform through the acquisition of Acentus, increased sales of specialty products through distribution businesses, implementation of restructuring initiatives to right-size expenses, and the full operational status of its global eCommerce platform.
As Henry Schein navigates a challenging market environment, its focus on high-margin segments and strategic acquisitions appears to be yielding modest improvements in profitability, even as overall sales growth remains constrained.
Full presentation:
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