HSIC: Down With Dental

Takeaway: Decelerating growth in dental in 2H12 in the US and Europe will put continued pressure on $HSIC going forward.

This week we initiated a short position in Henry Schein (HSIC) based on two factors: decelerating growth in dental and issues regarding Europe. We’ve been negative on the stock for the past 5 months or so due to the pressures outlined below.

US dental consumption is slated to decelerate in the back half of 2012 due to a combination of lackluster employment gains and rising inflation. This doesn’t bode well for what is largely a discretionary healthcare service. The chart below says it all.

With regard to Europe, we know that most of the EU has some version of Universal Healthcare. The problem is that not all procedures are reimbursed equally. The more discretionary (i.e. higher-cost) procedures will likely slow overall growth.

HSIC: Down With Dental  - hedgeye dental