* Q4 adj EPS 90 cents beats Street by 2 cents
* Net sales fall 7.5 pct; lags Street
* Cost cuts improve operating margin
* Sees no salary hikes in 2009
* Shares rise more than 3 pct (Recasts; adds background, details, CFO comments, analyst comments; updates share movement)
By Aradhana Aravindan
BANGALORE, Feb 24 (Reuters) - Several cost-cutting measures by Henry Schein (HSIC.O) to mitigate the impact of tighter hospital spending helped the medical-products supplier's quarterly profit slide past market estimates, sending its shares up more than 3 percent.
Sales at the company, which distributes diagnostic kits, surgical tools and X-ray equipment in North America and Europe, have taken a hit as healthcare spending has declined in the wake of the global economic downturn and a rise in the U.S. dollar.
Faced with a slowdown in sales, Henry Schein has sought to protect margins by cutting jobs and closing facilities. It is also exiting some low-margin businesses.
Additionally, Henry Schein said on Tuesday there would be no salary increases across all levels at the company in 2009. "I think it's better at this time to manage our expenses, assuming the markets will be relatively flat," Chief Financial Officer Steven Paladino told Reuters.
The Melville, New York-based company lowered its 2009 earnings estimate to $3.11 to $3.26 a share from its prior view of $3.27 to $3.36 a share. About 5 cents of the cut was due to unfavorable foreign exchange rates.
Still, the top end of the latest forecast is above Wall Street's view.
The outlook cut on Tuesday is unlikely to surprise many as investors were already expecting it, Robert W Baird analyst Jeff Johnson said. He maintained an "outperform" rating on shares of the company, which mainly supplies dental products.
The company's current valuation, and acquisition and operating margin expansion opportunities outweigh the impact of a slower dental market in 2009, he said.
Henry Schein's stock trades at about 11.5 times expected 2009 earnings per share. In contrast, shares of rivals Dentsply International Inc (XRAY.O) and Patterson Cos Inc (PDCO.O) trade at a multiple of 13.6 and 11.6, respectively.
In the latest fourth quarter, Henry Schein's earnings of 90 cents a share, excluding restructuring costs, beat market estimates even though sales were weak during the period.
Operating margin in the fourth quarter grew 76 basis points to 8.1 percent.
The company reported fourth-quarter net income of $64.2 million from continuing operations, including restructuring costs, compared with $76.7 million, a year earlier.
Net sales fell 7.5 percent to $1.58 billion, as sales at three of its four major segments dropped. Unfavorable foreign exchange rates also hurt sales.
International group sales fell 10.8 percent to $528 million. Dental group sales declined 2.4 percent to $665 million.
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The company's shares rose to a high of $37.27, before paring some gains to trade up $1.15 at $37.18 midday Tuesday on Nasdaq. (Editing by Pratish Narayanan)