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

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·3 min read
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Patterson Companies, Inc. PDCO is well-poised for growth backed by strength in dental segment and strong prospects in Animal Health. However, rising debt level remains a concern.

Shares of this Zacks Rank #2 (Buy) company gained 0.6% against the industry’s decline of 3.2% in the past month. The S&P 500 Index has fallen 3.9% in the same time frame.

Patterson Companies — with a market capitalization of $3 billion — is one of the leading distributors of dental and animal health products. It anticipates earnings to improve 9.6% over the next five years. The company has a trailing four-quarter earnings surprise 16.1%, on average.

Key Catalysts

Patterson Companies is expected to benefit from gradual recovery in the dental market and rebounding dental equipment business (especially in North America), assisted by increased technology marketing/promotional activities.

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

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In first-quarter fiscal 2022, the segment surged 41% year over year, driven by better-than-expected growth in consumables, equipment and software and value-added service categories. Uptick in internal sales included robust growth in consumables, and equipment and software.

Patterson Companies' growing Animal Health unit is a key long-term growth driver. In the fiscal first quarter of 2022, the segment registered growth of 23.5% on the back of solid internal sales growth and increase in internal sales in Companion Animal business.

The segment also benefited from rise in pet adoptions and increased attention to pets. Per the first-quarter fiscal 2022 earnings call, the Companion Animal market continues to flourish and is poised to gain from the long-term tailwinds of higher pet ownership and pet expenditure, and the faster-than-expected production animal market recovery.

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

Patterson Companies has been witnessing an upward estimate revision trend for 2022. In the past 60 days, the Zacks Consensus Estimate for its earnings has moved north by 1% to $2.03.

The Zacks Consensus Estimate for fiscal second-quarter 2022 revenues is pegged at $1.58 billion, suggesting growth of 1.9% from the year-ago reported number.

Other Stocks to Consider

Some other top-ranked stocks from the broader medical space are Henry Schein, Inc. HSIC, Envista Holdings Corporation NVST and West Pharmaceutical Services, Inc. WST, each currently carrying a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Henry Schein’s long-term earnings growth rate is estimated at 13.9%.

Envista Holdings’ long-term earnings growth rate is estimated at 27.4%.

West Pharmaceutical’s long-term earnings growth rate is projected at 27.3%.


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