Worldwide distributor of health care products and services, Henry Schein Inc. (HSIC), recently decided to buy nation-wide drug distributor and servicesprovider Cardinal Health, Inc.’s (CAH) brand products and utilize Cardinal Health as a primary source for various medical products. The company believes, this strategic step will provide one of the most comprehensive service and product offerings to its office-based medical practices.
Accordingly, both the companies have entered into a long-term strategic agreement which will combine Cardinal Health's product line and extensive touch points across the health system with Henry Schein's service capabilities in office-based practices. Both Henry Schein and Cardinal Health expect the transaction to be slightly accretive to their respective earnings per share in fiscal 2015 and gradually accretive thereafter.
Currently, management at Henry Schein is investing in growth opportunities that will enable the company to introduce new product categories, improve operating margin by enhancing operational efficiencies and develop new technology solutions and other value-added services that will improve the customer experience and elevate Henry Schein's position in the marketplace.
Moreover, Henry Schein’s revenue growth has been consistently supported by niche acquisitions. Evidently, the company has been on a buyout spree over the recent past. Its acquisition strategy helps it to pursue targets that provide access to additional product lines. In Oct 2014, Henry Schein entered into the Japan market with its noncontrolling investment in Iwase Dental Supply – the third largest dental dealer in Japan.
We are also upbeat on Henry Schein’s future growth prospects, owing to the company’s use of cash to make tuck-in acquisitions. New offerings and the company’s strategic buyouts should foster growth, going forward. Meanwhile, attractive returns to shareholders through consistent stock repurchase activity boost investor confidence.
Currently, Henry Schein retains a Zacks Rank #3 (Hold) while Cardinal Health holds a Zacks Rank #2 (Buy). Other well-placed stocks in the med/dental-supply industry include AmerisourceBergen Corp. (ABC) and CR Bard Inc. (BCR), both with the same Zacks Rank as Cardinal Health.
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