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Patterson Companies (PDCO) Q4 Earnings Beat, Revenues Up Y/Y

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Patterson Companies, Inc. PDCO reported adjusted earnings per share (EPS) of 71 cents in fourth-quarter fiscal 2022, which surpassed the Zacks Consensus Estimate of 56 cents by 26.8%. The bottom line increased a significant 86.8% from the prior-year quarter.

GAAP EPS in the quarter was 65 cents, up 116.7% from the prior-year quarter.

For fiscal 2022, the company reported adjusted EPS of $2.27, up 18.8%. The figure outpaced the consensus mark by 7.1%.

Revenue Details

Net sales in the quarter were $1.64 billion, which lagged the Zacks Consensus Estimate by 1.7%. The top line, however, improved 4.9% year over year.

For fiscal 2022, revenues were $6.49 billion, up 9.9% from the prior fiscal year. The figure beat the consensus mark by 0.3%.

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 fiscal fourth quarter, dental sales increased 3.3% year over year to $636.4 million.

Dental Consumable

Sales in the sub-segment totaled $354.3 million, down 0.8% year over year.

Patterson Companies, Inc. Price, Consensus and EPS Surprise

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

Dental Equipment & Software

Sales in the segment rose 14.2% on a year-over-year basis to $208.4 million.

Value-added Services and Other

This segment comprises technical service, parts and labor, software support services and office supplies. Sales at the segment fell 3.2% on a year-over-year basis to $73.8 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.

In the fiscal fourth quarter, the segment sales increased 7.3% on a year-over-year basis to $1.01 billion.

Corporate

Sales at the segment were ($5.5) million, against $6.4 million in the year-ago quarter.

Margin Analysis

Gross profit in the reported quarter was $348.2 million, up 14.4% year over year. As a percentage of revenues, gross margin of 21.2% expanded 170 basis points (bps) on a year-over-year basis.

Operating expenses in the reported quarter amounted to $275.4 million, up 3.1% from the prior-year quarter.

The company reported an operating income of $72.8 million, surging 95% from the year-ago quarter. As a percentage of revenues, operating margin of 4.4% expanded 200 bps on a year-over-year basis.

Financial Position

The company exited the fiscal fourth quarter with cash and cash equivalents of $142 million, compared with $165 million on a sequential basis.

Cumulative net cash used in operating activities at the end of the fiscal fourth quarter was $980.9 million, noticeably wider than the year-ago quarter’s net cash utilized in operating activities of $730.5 million.

Fiscal 2023 Earnings Outlook

Patterson Companies issued its earnings outlook for fiscal 2023. The company projects adjusted EPS in the range of $2.25 to $2.35. The Zacks Consensus Estimate for the same is pegged at $2.25 per share.

Our Take

Patterson Companies ended fourth-quarter fiscal 2022 on a strong note, wherein both earnings and revenues beat the consensus mark. The company witnessed a solid performance in the Animal Health segment in the quarter under review. Apart from Dental Consumable, the Dental business showed improvement. A prudent cost savings approach and solid sales execution worked in favor of the stock. Sustained momentum in the Animal Health business and the company’s solid position in the market got reflected in the fiscal fourth-quarter results. A solid earnings outlook for fiscal 2023 is encouraging. Expansion in both gross and operating margins bodes well.

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.

However, a rise in operating expenses remains a concern. Weakness in the Corporate segment is disappointing.

Zacks Rank

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

Earnings of Other MedTech Majors at a Glance

Some better-ranked stocks in the broader medical space that have announced quarterly results are UnitedHealth Group Incorporated UNH, AMN Healthcare Services, Inc. AMN and Masimo Corporation MASI.

UnitedHealth Group, carrying a Zacks Rank #2 (Buy), reported first-quarter 2022 adjusted EPS of $5.49, which beat the Zacks Consensus Estimate by 1.7%. Revenues of $80.1 billion outpaced the consensus mark by 1.9%. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

UnitedHealth has an estimated long-term growth rate of 14.8%. UNH’s earnings surpassed estimates in the trailing four quarters, the average surprise being 3.7%.

AMN Healthcare, sporting a Zacks Rank #1, reported first-quarter 2022 adjusted EPS of $3.49, which beat the Zacks Consensus Estimate by 7.4%. Revenues of $1.55 billion outpaced the consensus mark by 3.7%.

AMN Healthcare has an estimated long-term growth rate of 1.1%. AMN’s earnings surpassed estimates in the trailing four quarters, the average surprise being 15.6%.

Masimo reported first-quarter 2022 adjusted EPS of 93 cents, which surpassed the Zacks Consensus Estimate by 1.1%. Revenues of $304.2 million outpaced the Zacks Consensus Estimate by 3.6%. It currently carries a Zacks Rank #2.

Masimo has an earnings yield of 3.4% against the industry’s negative yield. MASI’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 4.4%.


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