JP Morgan Gives Update On Henry Schein Following Recent Earnings Report

JP Morgan maintains a Neutral rating on Henry Schein HSIC. While an improving economy could lead to stronger top line trends and accelerating earnings growth, JP Morgan believe this is already priced in. Shares are up 20% year-to-date (vs. an 8% rise in the S&P 500), and valuation is at a multi-year high. While HSIC delivered solid 1Q11 earnings yesterday, with a high quality $0.02 beat, and reaffirmed the FY11 EPS guidance, JP Morgan continues to remain somewhat cautious given the potential ongoing impact of the economy. Gross margin came in $30M above JP Morgan's forecast, while gross margin of 29.0% was above the 28.4% estimate and compared to 29.1% in the year ago period. Higher than expected SG&A expense offset some of the upside on the gross profit line versus JP Morgan's estimates. This led to operating income that was $10M above its expectation. JP Morgan is raising its FY11 EPS estimate by $0.02 as it lets the upside from 1Q11 flow through the model, and maintaining our FY12 EPS estimate of $4.35. Its FY11 EPS estimate is at the midpoint of the guidance range, and represents 10% y/y growth, while FY12 EPS estimate also implies roughly 10% growth over FY11 estimate. JP Morgan has a Neutral rating and $72 PT (from $63) on HSIC HSIC closed Tuesday at $73.55