HSIC

Henry Schein ($HSIC) Breaks Year-Long Selling Streak with 'Only Buy'...KKR Director's $670K Bet Signals Turnaround

08/12/2025 04:15

William Daniel, a new director at Henry Schein ($HSIC), purchased 10,000 shares at $67.08 per share on August 7, investing approximately $670,800. This transaction stands as the only insider purchase amid a year-long streak of insider selling, signaling a potential turning point for investors. Henry Schein, founded in 1932, is a global distributor of medical and dental products operating across 33 countries with annual revenues of $12.7 billion. The company's core businesses include distribution of dental and medical products, medical device manufacturing, and practice management software development. It competes with major players like McKesson and Cardinal Health in the medical distribution industry. Daniel's purchase is noteworthy for several reasons. Over the past year, key executives including CLO Walter Siegel, EVP Mark Mlotek, SVP Lorelei McGlynn, and EVP Michael Ettinger have all sold shares, with McGlynn disposing of $1.46 million worth in September 2024 alone. Daniel's purchase represents the sole buying activity among insiders during this period. More significantly, Daniel joined the board earlier this year as part of KKR's strategic investment. KKR acquired a 12% stake in Henry Schein and joined the board with the goal of improving operational efficiency and enhancing shareholder value. A personal investment by a director recommended by a private equity specialist reflects strong confidence in the company's improvement prospects. Henry Schein currently faces challenging conditions. Q2 2025 results showed revenue growth of 3.3% year-over-year to $3.24 billion, but adjusted earnings per share declined to $1.10 from $1.23 in the prior year period. U.S. dental merchandise sales plummeted 29%, highlighting difficulties in core business segments. Margin compression continues due to inflationary pressures and intensifying price competition. However, the company is pursuing aggressive restructuring to achieve over $100 million in annual cost savings. Through collaboration with KKR Capstone, it's working to improve gross margins and operational efficiency, having already incurred $23 million in restructuring costs in Q2. Profitability improvements are expected to materialize beginning in the second half of the year. From a valuation perspective, the current price level appears attractive. At $66.10, the stock trades near the lower end of its one-year range ($60.56-$82.49), suggesting relative undervaluation. The forward P/E ratio of 13.93x represents a significant discount to the industry average of ~18x, while the price-to-sales ratio of 0.65x is below the industry average of 1.0x. Pressure from activist investor Ananym Capital is accelerating positive changes. The firm argues that divesting the medical distribution business could boost the stock price by 20% and improve earnings per share by 35%, pushing for more aggressive structural changes. External pressure for management changes and capital allocation optimization increases the likelihood of accelerated shareholder-friendly policies. Tariff policy concerns present near-term risks. The Trump administration's reciprocal tariff policies are expected to increase costs for personal protective equipment (PPE) sourced from China and Southeast Asia. However, this affects the entire industry, not just Henry Schein. The company's scale advantages position it relatively well to absorb tariff burdens. Growth in the technology segment is also noteworthy. The Henry Schein One digital platform for dental practice management solutions recorded 7.4% growth in Q2. Through technology innovation including digital patient intake systems and Dentrix platform integration, the company is increasing its high-margin services mix. International business performance remains solid. International dental distribution grew 6%, while international medical distribution surged 18%. The strategy of complementing mature U.S. market limitations through overseas expansion is proving effective. Several factors warrant attention over the next six months. The key will be how much restructuring benefits materialize in the Q3 earnings announcement scheduled for November 4. Achievement of annual guidance for adjusted EPS of $4.80-$4.94, along with the degree of second-half performance improvement, will determine stock direction. Results from KKR collaboration will also be important to monitor. Whether the private equity firm's operational expertise translates into actual performance improvements and potential additional strategic changes bear watching. With continued pressure from activist investors, management's response approach will impact the stock price. Long-term prospects benefit from structural healthcare market growth and aging demographic trends. As digitization of dental care and demand for medical service efficiency improvements increase, Henry Schein's technology solutions and distribution network should become increasingly valuable. However, several risks remain. Margin pressure could persist longer than expected, tariff policy uncertainty continues, and restructuring effects might fall short of expectations. Industry competition intensification and regulatory changes also require monitoring. Overall, William Daniel's purchase represents more than a simple transaction—it signals a potential company inflection point. As the only purchase reversing a year-long insider selling trend and reflecting KKR's strategic perspective, it suggests significant medium to long-term investment appeal given current relative undervaluation, ongoing restructuring effects, and accelerated changes driven by external pressure.