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Here's Why You Should Retain 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 a robust product portfolio and strong prospects in Animal Health. However, intense competition remains a concern.

Shares of this Zacks Rank #3 (Hold) company have lost 9.3% compared to the industry’s growth of 13% in a year’s time. The S&P 500 Index has declined 12.3% in the same timeframe.

Patterson Companies — with a market capitalization of $2.77 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

Patterson Companies provide a wide range of consumable supplies, equipment and software, and value-added services to its customers. The company’s wide range of products hedges it from any meaningful sales shortfall during an economic downturn.

While Pivotal, which is a private-label brand, is a notable offering from the company, it continues to add SKUs to its broader private-label portfolio.

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Zacks Investment Research


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Management at Patterson Companies expects solid margin improvement in the Animal Health Unit through stronger partnerships with product manufacturers and strong sales execution. Both the company’s companion animal and production animal businesses are anticipated to maintain sustained growth. In fact, the company is optimistic that the Animal Health business is well-poised to drive the top line and, thereby, margins in the near term.

Patterson Companies is well-poisitioned 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.

What’s Weighing on the Stock

The U.S. dental products distribution industry is highly competitive and consists principally of national, regional and local full-service and mail-order distributors. Patterson Companies faces competition not only from other national and full-service firms but also from at least 15 full-service distributors that operate on a regional level besides hundreds of small local distributors. Patterson Companies needs to continuously introduce new products in the market to counter competitive pressures. Failure to do so can dilute the company’s market share.

Estimates Trend

For fiscal 2023, the Zacks Consensus Estimate for revenues is pegged at $6.62 billion, indicating growth of 2.4% from the year-ago period. The same for adjusted earnings per share stands at $2.25, suggesting an improvement of 6.3% from the prior-year reported figure.

Stocks to Consider

Some better-ranked stocks in the broader medical space are AMN Healthcare Services, Inc. AMN, Masimo Corporation MASI and ShockWave Medical, Inc. SWAV.

AMN Healthcare surpassed earnings estimates in each of the trailing four quarters, the average surprise being 15.6%. The company currently sports a Zacks Rank #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 1.1%. The company’s earnings yield of 11.4% compares favorably with the industry’s (0.8%).

Masimo beat earnings estimates in each of the trailing four quarters, the average surprise being 4.4%. The company currently carries a Zacks Rank #2 (Buy).

Masimo’s estimated earnings growth rate for second-quarter 2022 is pegged at 22.3%. The company’s earnings yield is 3.8% against the industry’s (8.5%).

ShockWave Medical surpassed earnings estimates in each of the trailing four quarters, the average surprise being 189.9%. The company currently flaunts a Zacks Rank #1.

ShockWave Medical’s earnings growth rate for 2022 is estimated at 807.7%. The company’s earnings yield of 0.9% compares favorably with the industry’s (8%).


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