Analyst Note| Soo Romanoff |
Despite the perfect storm with a decline in equipment sales with unexpected sourcing changes and extreme operational changes with the conversion of certain warehouse to aid the U.S. government COVID-19 testing response, no-moat Henry Schein reported fourth-quarter results largely as expected. The roughly 8% intraday decline in shares, however, was a reflection of the 2021 guidance calling for a normalized EPS floor of the $3.51 as reported in 2019. This guidance comes across as extremely conservative as there should only be upside as visits and procedures resume as normal. We view the market reaction and conservative guidance to be extreme, as dental and medical providers will continue to lean on leading distributor partners to procure highly demanded items through the extended recovery as well as seek more comprehensive IT solutions. We maintain our $68 fair value estimate.