Shares of medical and dental products distributor Henry Schein (NASDAQ:HSIC) rose more than 4% yesterday following the company's announcement of Q4 (ended Dec. 25) and full-year financial results. Add this one to the "Wish I'd bought shares back then" file: The Melville, N.Y.-based company's stock has risen substantially from when I poked around a European acquisition back in June.
The reasons why the shares have done that are right there in the press release. Q4 sales jumped more than 26% year over year to $1.19 billion, a high for the company -- they managed a 9% jump even if you ignore the substantial effects of acquisitions. Not that you should: There's nothing wrong with growing a business via purchase as long as those purchases don't cost too much or dilute profits, and the latter certainly hasn't been the case.
Evidence: Net income rose nearly 7% over last year's levels to $37.9 million in the fourth quarter. (As was also the case in Q3, Henry Schein preferred investors note its adjusted numbers -- its actual reported profits were $29.6 million, which reflects a $13.2 million charge associated with Chiron's (NASDAQ:CHIR) well-documented inability to get its flu vaccine onto the market this winter. Chiron's a Henry Schein partner; the drug company isn't the only one that lost money.)
Looking ahead, Henry Schein is providing guidance that takes Chiron's continued problems into account (although we'll have to see how the just-lifted ban on Chiron's flu-shot production plant in the U.K. affects the situation). Management maintained previous 2005 numbers (issued before a 2-for-1 stock split, in case you're confused) of between $2 and $2.04 per share and provided for the possibility that the vaccine might not make it back on the market again this year, saying that EPS could be pulled down to the $1.73-$1.77 range should that happen.
That's a pretty big window for the company to fly through. Management seems to understand that, as it announced a share buyback today that'll provide it some cushion if it needs to "manage" EPS. (The company generates plenty of cash; so repurchasing shares isn't too tough.)
Given yesterday's upward move, investors seem happy enough with the deal and the apparently comforting revelation that the last four months have brought them mostly good news like acquisitions and new partnerships rather than more unforeseen, Chiron-like challenges.
Fool contributor Dave Marino-Nachison doesn't own any of the companies in this story.
