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Patterson Companies' (PDCO) Earnings Miss Estimates in Q4

Zacks Equity Research

Patterson Companies, Inc. PDCO reported adjusted earnings per share (EPS) of 37 cents in the fourth quarter of fiscal 2019, which missed the Zacks Consensus Estimate by 7.5%. However, the bottom line improved 23.3% year over year.
 
Net sales in the quarter were $1.44 billion, up 2.6% year over year, beating the Zacks Consensus Estimate by 0.6%.

FY19 at a Glance

Full-year adjusted earnings per share of $1.40 deteriorated 16.7% from $1.68 a year ago. The reported figure missed the Zacks Consensus Estimate of $1.43.

Revenues in fiscal 2019 grossed $5.57 billion, up 2% from the year-ago period. This figure met the Zacks Consensus Estimate.

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

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 as well as laboratories throughout North America.
 
In the fourth quarter, dental sales rose 3.2% year over year to approximately $563.5 million.
 
Dental Consumable

 
Sales in the sub-segment totaled $312.1 million, down 1.9% year over year.
 
Dental Equipment & Software
 

Sales in the segment increased 11.9% on a year-over-year basis to $174.6 million.
 
Other
 
This segment comprises technical service, parts and labor, software support services and office supplies. Sales at the segment improved 7% on a year-over-year basis to $76.8 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 fourth-quarter performance of the platform, sales increased 2.2% on a year-over-year basis to $866.4 million.
 
Corporate
 
Sales at the segment were $6.8 million, dipped 0.7% from the year-ago quarter’s $6.9 million.
 
Gross Margin Analysis
 
Gross profit in the reported quarter was $312.5 million, up 7.8% year over year. As a percentage of revenues, gross margin of 21.8%, up 110 bps year over year.
 
Operating expenses in the reported quarter totaled $265.9 million, up nearly 7% on a year-over-year basis.

Fiscal 2020 Guidance

For fiscal 2020, Patterson Companies expects adjusted earnings per share in the range of $1.33 to $1.43. The mid-point of the guidance of $1.38 lies noticeably below the Zacks Consensus Estimate of $1.53.
 
Our Take
 
Patterson Companies ended the fourth quarter of fiscal 2019 on a mixed note. We are upbeat about the Animal Health segment’s solid performance of late. In fact, the Dental unit witnessed a year-over-year upside in the quarter as well. 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. Increase in operating expenses add to woes.

Zacks Rank

Patterson Companies has a Zacks Rank #3 (Hold).

Earnings of MedTech Majors at a Glance

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

Baxter (BAX) reported first-quarter 2019 adjusted earnings of 76 cents per share, which surpassed the Zacks Consensus Estimate of 68 cents by 11.8%. Revenues of $2.63 billion outpaced the Zacks Consensus Estimate of $2.62 billion.

DENTSPLY reported adjusted earnings per share (EPS) of 49 cents in the first quarter of 2019, beating the Zacks Consensus Estimate of 38 cents. Revenues of $946.2 million surpassed the Zacks Consensus Estimate of $917.1 million.

CONMED posted first-quarter 2019 adjusted earnings per share of 57 cents, which beat the Zacks Consensus Estimate of 54 cents. Revenues were $218.4 million, surpassing the Zacks Consensus Estimate of $213 million.

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