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Patterson Reports Fiscal 2Q16 Earnings, Drags Down Mid-Caps

Peter Neil

XLV Gets Stronger with Large-Cap Holdings Gains

(Continued from Prior Part)

XLV mid-caps underperform

The mid-cap stocks of the Health Care Select Sector SPDR ETF (XLV) fell 0.45% and underperformed XLV and the SPDR S&P 500 ETF (SPY), which had returns of 0.3% and 0.15%, respectively.

XLV has a very low exposure to mid-cap stocks. XLV has only seven mid-cap stocks in its portfolio, accounting for 1.8% of its portfolio. Among the seven mid-cap stocks, five stocks fell, and only two had positive returns. XLV’s mid-cap stocks include DENTSPLY International (XRAY), Varian Medical Systems (VAR), and Tenet Healthcare (THC), which had returns of -0.95%, 0.1%, and 4.7%, respectively.

The above graph reflects the performance of XLV’s mid-cap stocks compared to XLV and SPY. For November 2015 to date, XLV’s mid-cap has outperformed XLV and SPY. XLV’s mid-cap has returned 2.2%, XLV has returned 0.3%, and SPY has returned 0.75%.

Patterson falls 6% on lower-than-expected results

Patterson Companies (PDCO) fell 6% on its lower-than-expected fiscal 2Q16 results. It reported net sales of $1.4 billion, a growth of 42% compared to the second quarter the previous year. Sales growth was mainly driven by the animal health segment, which saw a growth of 109%.

Patterson reported an adjusted EPS (earnings per share) of $0.56, a 27% increase over the prior year. Reported net income stood at $42.6 million compared to $41.9 million in the second quarter of the previous year. However, investors were disappointed with increasing operating expenses, which resulted in PDCO stock falling 6%. PDCO also bought back 3.9 million common shares under a share repurchase program.

PDCO closed at $45.71 and was trading below the 50-day and 100-day moving averages. PDCO has a weight of 0.15% in XLV’s portfolio.

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