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Here's Why You Should Invest in Patterson Companies (PDCO) Stock

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·4 min read
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Patterson Companies, Inc. PDCO is well-poised for growth on strength in the dental segment and strong prospects in Animal Health.

Shares of this Zacks Rank #2 (Buy) company have gained 6.5% against the industry’s decline of 1.9% on a quarter-to-date basis. The S&P 500 Index has decreased 5.2% in the same time frame.

Patterson Companies — with a market capitalization of $3.05 billion — is one of the leading distributors of dental and animal health products. It anticipates earnings to improve 9.9% over the next five years. The company beat earnings estimates in three of the trailing four quarters and missed once, the average surprise being 2.7%.

Key Catalysts

Gradual recovery in the dental market and rebounding dental equipment business (especially in North America), supported by increased technology marketing/promotional activities, have favored Patterson Companies. Per management, in the third quarter of fiscal 2022, sales at this segment inched up 0.3% year over year. Throughout the Dental segment, the company’s field sales, service and support teams remain committed toward delivering value to its customers and business partners, thereby driving solid operational excellence.

Per management, the company remains optimistic about serving a strong and stable dental end market.

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Patterson Companies' Animal Health unit is a key long-term growth driver. In the second quarter of fiscal 2022, the segment registered growth of 5.6% on the back of solid internal sales increase (more than 8%), and sixth straight quarter of double-digit growth in the Companion Animal business and sustained strength in production animal business. The Animal Health segment delivered both gross margin and operating margin improvement in the quarter on the back of higher sales growth with vendor partners, improved product mix with solid product sales, private label products, equipment and software, and a team focused on expense discipline.

The segment gained from the rise in pet adoptions and increased attention to pets. Per the third-quarter fiscal 2022 earnings call, the Companion Animal business shows signs of prosperity. It is poised to gain from the long-term tailwinds of higher pet ownership that has taken place in the past two years.

Patterson Companies is well-positioned to leverage the incremental growth opportunity in this space on the back of comprehensive sales and support infrastructure and the value it brings to its veterinary consumers daily.

Estimates Trend

For fiscal 2022, the Zacks Consensus Estimate for Patterson Companies’ earnings is currently pegged at $2.12, indicating an improvement of 10.9% from the previous year. The same for revenues stands at $6.47 billion, suggesting growth of 9.5% from the year-ago reported number.

Other Stocks to Consider

Some other top-ranked stocks from the broader medical space are AMN Healthcare Services, Inc. AMN, Henry Schein, Inc. HSIC and McKesson Corporation MCK.

AMN Healthcare surpassed earnings estimates in each of the trailing four quarters, the average surprise being 20%. The company currently sports a Zacks Rank of 1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

AMN Healthcare’s long-term earnings growth rate is estimated at 16.2%. AMN’s earnings yield of 8.8% compares favorably with the industry’s 0.3%.

Henry Schein beat earnings estimates in each of the trailing four quarters, the average surprise being 25.5%. The company currently carries a Zacks Rank #2.

Henry Schein’s long-term earnings growth rate is estimated at 11.8%. HSIC’s earnings yield of 5.6% compares favorably with the industry’s 4.1%.

McKesson surpassed earnings estimates in each of the trailing four quarters, the average surprise being 20.6%. The company currently carries a Zacks Rank #2.

McKesson’s long-term earnings growth rate is estimated at 11.8%. MCK’s earnings yield of 8.8% compares favorably with the industry’s 4.1%.


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Henry Schein, Inc. (HSIC) : Free Stock Analysis Report

Patterson Companies, Inc. (PDCO) : Free Stock Analysis Report

AMN Healthcare Services Inc (AMN) : Free Stock Analysis Report

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