Reasons to Add Patterson Companies (PDCO) to Your Portfolio Now
Patterson Companies, Inc. PDCO is well poised for growth in the coming quarters, courtesy of its broad product line. The optimism, led by a solid fiscal fourth-quarter 2023 performance and a few notable acquisitions, is expected to contribute further. Integration risks and stiff competitive forces persist.
Over the past year, shares of this Zacks Rank #1 (Strong Buy) company have lost 4.2% against the industry’s 18% growth. The S&P 500 Index has gained 15.5% during the same time frame.
The renowned global dental and animal health company has a market capitalization of $2.65 billion. It projects 9.2% growth for the next five years and expects to maintain its strong performance going forward. Patterson Companies’ earnings surpassed the Zacks Consensus Estimate in three of the trailing four quarters and missed once, delivering a surprise of 4.52%, on average.
Let’s delve deeper.
Broad Product Spectrum: We are optimistic about Patterson Companies’ wide range of consumable supplies, equipment and software, and value-added services. A notable offering from PDCO is a private-label brand named Pivotal, while it continues adding stock keeping units to its broader private-label portfolio. Patterson Companies’ NaVetor is an integrated cloud-based veterinary practice management software for its Animal Health segment.
Acquisitions: We are upbeat about PDCO’s strategy of expanding its business via strategic acquisitions. In January, it announced that it had, through subsidiaries, completed the previously-announced acquisition of substantially all the assets of Relief Services for Veterinary Practitioners and Animal Care Technologies.
In 2022, the company announced that it had, through a subsidiary, closed the previously announced acquisition of substantially all the assets of Dairy Tech, Inc.
Strong Q4 Results: Patterson Companies’ better-than-expected earnings in fiscal fourth-quarter 2023 results buoy optimism. Strength in the overall top line, Value-added Services and Other business of the Dental segment and the overall Animal Health segment was witnessed. The gross margin expansion bodes well for the company. Prudent cost-saving initiatives and solid sales execution continue to favor Patterson Companies.
Downsides
Stiff Competition: The U.S. dental products distribution industry is highly competitive and consists chiefly of national, regional and local full-service and mail-order distributors. Patterson Companies needs to continue to introduce newer products in the market to withstand competitive pressures. Failure to do so can dilute the company’s market share.
Integration Risks: Patterson Companies has been on an acquisition spree, which is improving its revenue opportunities but aggravating integration risks. Regular acquisitions are also a distraction for management that is likely to impact organic growth. This may limit Patterson Companies’ future expansion and worsen its risk profile, going forward.
Patterson Companies, Inc. Price
Patterson Companies, Inc. price | Patterson Companies, Inc. Quote
Estimate Trend
Patterson Companies is witnessing an upward estimate revision trend for fiscal 2023. In the past 60 days, the Zacks Consensus Estimate for its earnings has improved from $2.34 per share to $2.50.
The Zacks Consensus Estimate for the company’s fiscal first-quarter 2024 revenues is pegged at $1.57 billion, indicating a 3.2% improvement from the year-ago quarter’s reported number.
Other Stocks to Consider
Some other top-ranked stocks in the broader medical space are West Pharmaceutical Services WST, McKesson MCK and Cardinal Health CAH, each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
West Pharmaceutical Services has an estimated earnings growth rate of 4.6% over the next five year. The company’s earnings surpassed estimates in three of the trailing four quarters and missed the same in one, delivering an average surprise of 12.47%.
WST’s shares have risen 68.8% year to date compared with the industry’s 17.3% growth.
McKesson has an estimated long-term growth rate of 10.7%. The company’s earnings surpassed estimates in three of the trailing four quarters and missed the same in one, delivering an average surprise of 8.1%.
MCK’s shares have rallied 16.8% year to date compared with the industry’s 17.2% growth.
Cardinal Health has an estimated long-term growth rate of 13.5%. CAH’s earnings surpassed estimates in three of the trailing four quarters and missed once, delivering an average surprise of 12.28%.
Cardinal Health’s shares have risen 20.2% year to date compared with the industry’s 17.2% growth.
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