Henry Schein’s Q1 Earnings: Navigating Headwinds with Strategic Resolve

Henry Schein, a global leader in healthcare products and services, delivered a resilient performance in its first quarter of 2025, despite facing headwinds from currency fluctuations and supply chain challenges. While its top-line growth was modest, the company’s focus on operational efficiency, strategic investments, and share repurchases underscores its commitment to long-term value creation. Let’s unpack the key takeaways.

Revenue: Currency-Adjusted Growth Masks Surface-Level Declines

Henry Schein reported $3.168 billion in net sales for Q1 2025, a 0.1% decline year-over-year (YoY). However, this dip was largely due to a stronger U.S. dollar, which eroded international sales. Adjusting for currency impacts, sales grew 1.4%, with even stronger momentum (2.0%) when excluding pandemic-related products like PPE and COVID test kits. This adjustment reveals underlying demand resilience in its core markets.

Segment Performance: Strengths and Weaknesses Across Divisions

The company’s three main segments told divergent stories:
1. Global Distribution and Value-Added Services: Sales fell 0.7% YoY but rose 0.8% in constant currencies. Dental merchandise sales grew 0.4% (excluding pandemic products, 0.9%), though January sales were hampered by extreme weather. Equipment sales dropped 2.4% due to prior-year distortions. Medical distribution, however, surged 3.0% on rising patient traffic and acquisitions.
2. Global Specialty Products: The standout performer, with sales up 4.3% in constant currencies, driven by implant and biomaterial sales.
3. Global Technology: Grew 3.4% in constant currencies, fueled by cloud-based software like Dentrix Ascend. Legacy product declines, however, tempered this growth.

Profitability: Margin Gains and Strategic Investments

While revenue faced headwinds, profitability improved significantly. GAAP net income rose 22% YoY to $110 million, or $0.88 per share, while non-GAAP EPS increased 4.5% to $1.15. The latter excludes restructuring costs and one-time items, reflecting operational improvements.

Strategic Moves: Restructuring and Share Buybacks

• Restructuring Plan: The company spent $25 million on restructuring in Q1, aiming to deliver $75–100 million in annual savings by year-end. This reflects a focus on cost discipline.
• Share Repurchases: Henry Schein bought back 2.3 million shares worth $161 million, with $718 million remaining under its repurchase program. This signals confidence in its stock’s valuation.
• BOLD+1 Strategy: The long-term plan targets high-single-digit to low-double-digit earnings growth, emphasizing customer experience, specialty business expansion, and digital solutions.

Risks and Challenges: Navigating Uncertainty

Despite progress, risks persist:
- Currency Volatility: The U.S. dollar’s strength continues to pressure international sales.
- Supply Chain Disruptions: Pandemic-era logistics issues linger, though medical distribution gains suggest gradual normalization.
- Cybersecurity: The 2023 data breach remains a shadow, with ongoing costs and reputational risks.

Financial Outlook: Guidance Holds Steady

Henry Schein reaffirmed its 2025 outlook:
- Non-GAAP EPS: Expected to grow 1-4% to $4.80–$4.94, up from $4.74 in 2024.
- Sales Growth: 2-4% YoY, excluding currency impacts.
- Adjusted EBITDA: Projected to rise mid-single digits, reflecting margin discipline.

Conclusion: A Resilient Foundation for Growth

Henry Schein’s Q1 results highlight its ability to navigate macroeconomic turbulence while executing strategic initiatives. Despite currency headwinds, its constant-currency sales growth, margin expansion, and disciplined capital allocation position it well for 2025. The $75–100 million annual savings from restructuring and the $718 million remaining in buybacks further bolster its financial flexibility.

However, investors must weigh these positives against lingering risks like currency volatility and supply chain uncertainty. With adjusted EBITDA up to $259 million and a strong balance sheet ($10.5 billion in assets), the company is primed to capitalize on secular trends in healthcare digitization and specialty products.

In a sector increasingly defined by innovation and efficiency, Henry Schein’s focus on its BOLD+1 strategy—coupled with its Q1 resilience—suggests it remains a compelling play for investors seeking steady, diversified healthcare exposure.