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Patterson Companies (PDCO) Earnings Beat Estimates in Q1

Zacks Equity Research

Patterson Companies, Inc. PDCO reported adjusted earnings per share (EPS) of 27 cents in the first quarter of fiscal 2020, which beat the Zacks Consensus Estimate by 8%. Moreover, the bottom line improved 3.8% year over year.
 
Net sales in the quarter were $1.33 billion, missing the Zacks Consensus Estimate by 2.9%. Further, the figure declined 0.6% year over year.

Segmental Analysis
 

The company currently distributes products through subsidiaries Patterson Dental and Patterson Animal Health.

Dental Segment

This segment provides a complete range of consumable dental products, equipment, software, turnkey digital solutions and value-added services to dentists, and laboratories throughout North America.
 
In the first quarter, dental sales declined 1% year over year to approximately $501.1 million.
 
Dental Consumable
 
Sales in the sub-segment totaled $302 million, down 0.7% year over year.
 
Dental Equipment & Software
 
Sales in the segment fell 6.9% on a year-over-year basis to $125.7 million.
 
Other
 
This segment comprises technical service, parts and labor, software support services and office supplies. Sales at the segment improved 9.8% on a year-over-year basis to $73.4 million.
 
Animal Health Segment

This segment is a leading distributor of veterinary supplies to clinics, public and private institutions and shelters across the United States.

Coming to the first-quarter performance of the platform, sales declined 0.9% on a year-over-year basis to $817.5 million.
 
Corporate
 
Sales at the segment were $9.9 million, soaring 97.9% from the year-ago quarter’s figure of $5 million.

Patterson Companies, Inc. Price, Consensus and EPS Surprise

 

Patterson Companies, Inc. Price, Consensus and EPS Surprise

Patterson Companies, Inc. price-consensus-eps-surprise-chart | Patterson Companies, Inc. Quote

Gross Margin Analysis
 
Gross profit in the reported quarter was $290.1 million, up 2.3% year over year. As a percentage of revenues, gross margin of 21.8%, improved 60 bps year over year.
 
Operating expenses in the reported quarter totaled $273.4 million, down 2.1% on a year-over-year basis.

Operating income came in at $16.7 million, which improved a whopping 269.4% from the year-ago quarter. Operating margin of 1.3% improved 100 bps from the prior-year quarter.

Fiscal 2020 Guidance

For fiscal 2020, Patterson Companies continues to expect adjusted earnings per share in the range of $1.33 to $1.43. The mid-point of the guidance of $1.38 is in line with the Zacks Consensus Estimate.
 
Our Take
 
Patterson Companies ended the first quarter of fiscal 2020 on a mixed note. The company’s consistent efforts to drive profitability in its core business were represented by the performance displayed in reported quarter. Expansion in both gross and operating margins is a positive. The Corporate segment exhibited significant growth in sales in the quarter under review. The company provides a wide range of consumable supplies, equipment, software and value-added services.
 
A broad spectrum of products cushions the company against economic downturns in the MedTech space. We believe that a diverse product portfolio, strong veterinary business prospects, accretive acquisitions and strategic partnerships are key catalysts.
 
Meanwhile, declining Dental Consumable revenues remains a concern.

Zacks Rank

Patterson Companies has a Zacks Rank #4 (Sell).

Earnings of Other MedTech Majors at a Glance

Some better-ranked stocks which posted solid results this earning season are CONMED Corporation CNMD, Baxter International Inc. BAX and Intuitive Surgical, Inc. ISRG, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

CONMED delivered second-quarter 2019 adjusted earnings per share of 56 cents, which beat the Zacks Consensus Estimate of 53 cents by 5.7%. Revenues of $238.3 million surpassed the Zacks Consensus Estimate by 2.2%.

Baxter delivered third-quarter 2019 adjusted earnings of 89 cents per share, which surpassed the Zacks Consensus Estimate of 81 cents by 9.9%. Revenues of $2.84 billion outpaced the Zacks Consensus Estimate of $2.79 billion by 1.9%.

Intuitive Surgical reported third-quarter 2019 adjusted earnings per share of $3.25, which beat the Zacks Consensus Estimate of $2.85. Revenues were $1.1 billion, surpassing the Zacks Consensus Estimate of $1.03 billion.

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