Is HSIC Worth Buying as Growth Improves but Execution Risks Persist?

HSIC’s Core Businesses Are Showing Better Growth

Second-quarter growth was broad. Global Distribution and Value-Added Services sales rose 6.6%, Global Specialty Products increased 8.7% and Global Technology advanced 8.2%. That mix reduces reliance on any single business line to carry the growth story.

Internal growth was also healthy in key areas. Global Distribution and Value-Added Services posted 4.5% internal growth, while Technology delivered 9.1%, helping management lift its 2026 total sales growth outlook to 4.5%-5.5%.

Henry Schein One Adds a Recurring Growth Engine

Henry Schein One gives HSIC a recurring component alongside its distribution operations. About 90% of its revenues are recurring, and nearly 13,000 customers subscribe to the Dentrix Ascend and Dentally cloud-based platforms.

June set a record for new Dentrix Ascend customers. Those customers generate about $800 in average monthly revenues, versus roughly $500 across Henry Schein One’s broader customer base, supporting a higher-value software mix as adoption grows.

HSIC’s Value Creation Plan Could Lift Profitability

Management continues to target more than $200 million of operating income improvement over the next few years and a $125 million annualized run rate by the end of 2026. The plan is becoming increasingly important to the earnings trajectory.

Initial savings from global outsourcing were expected to begin in the third quarter. For 2026, roughly 60% of in-year operating income improvement is expected from general and administrative savings and 40% from gross profit initiatives.

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Henry Schein’s Balance Sheet Raises the Risk Bar

HSIC ended the second quarter with $157 million in cash and cash equivalents, compared with $138 million of current debt maturities and $2.30 billion of long-term debt. Interest expense rose to $43 million from $39 million in the first quarter.

Inflation, tariffs, freight and energy costs add pressure, while larger dental support organizations can negotiate more aggressively on pricing and rebates. Dentsply Sirona Inc. XRAY, a major dental-products and technology company, underscores the competitive intensity across dental markets.

McKesson Corporation MCK is another large healthcare distribution company serving providers with medical products and services. Its scale illustrates the broader competitive environment in healthcare distribution, where purchasing power and execution discipline matter.

HSIC Trades Below Key Market Valuation Benchmarks

HSIC trades at 15.60X forward 12-month earnings, below 17.53X for its Zacks sub-industry, 21.10X for the Zacks Medical sector and 20.63X for the S&P 500. That discount offers some valuation support.

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The stock is not cheap against its own recent history. Its forward multiple remains above the five-year median of 14.41X, so investors are still paying more than HSIC’s typical valuation despite the discount to broader benchmarks.

HSIC’s Style Scores Support a Selective Approach

The bottom line is that HSIC has more fundamental support than it did earlier in the year, but the case still depends on execution. Broader sales growth, recurring technology revenues and planned savings are positives, while leverage and margin risks remain.

HSIC currently carries a Zacks Rank #3 (Hold), with a Value Score of A, Growth Score of B and Momentum Score of F. The combination favors investors focused on valuation and improving growth characteristics, but the weak Momentum Score argues for selectivity rather than treating the stock as an uncomplicated buy.

You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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