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Patterson Companies Inc. (PDCO - Analyst Report), a Minnesota-based distributor of dental, veterinarian and rehabilitation medical supplies, has collaborated with SumTotal Systems, LLC, a provider of integrated Human Resource (HR) solutions. Patterson will be utilizing the latter’s SumTotal Talent Expansion applications to build upon its mobile and social learning abilities.

Given the need of the hour to fight strong competition, Patterson recognized the necessity of adding value to its existing workforce, to drive both personal and professional excellence. PDCO’s decentralized 7,000-strong workforce is spread across the U.S., Canada, U.K., Australia, France and China. Therefore, it became imperative for management to keep their employees updated with the latest HR technologies.

Talent Expansion is a learning-focused approach to HR technology that assists employees to expand their talent real time. We believe SumTotal’s interactive, intuitive user interface and robust reporting capabilities should help develop the hidden potential within PDCO’s workforce.  

Patterson currently has a Zacks Rank #3 (Hold). The company reported a disappointing fiscal 2014 first-quarter results, reflecting a challenging macro environment. PDCO’s earnings per share (EPS) of 45 cents in the reported quarter remained flat year over year and missed the Zacks Consensus Estimate by 3 cents.

Moreover, revenues dropped marginally by 1% to $880.1 million from $889.2 million reported in the first quarter of fiscal 2013. Revenues were considerably lower than the Zacks Consensus Estimate of $918 million.

The core dental business also faced difficult year-over-year comparisons in the quarter. However, management is confident that the business will deliver incremental returns for the rest of fiscal 2014 on the back of its new product CEREC Omnicam, and rising demand.

Despite these shortcomings, we note that Patterson’s Veterinary business is growing modestly, reflecting a tailwind in the underlying market. Moreover, the Medical business is also geared to improve in the long-term, reaping the benefits of PDCO’s advanced products portfolio and underlying favorable demographics.

While we choose to remain on the sidelines regarding PDCO, medical/dental supplies companies that are worth considering include STRAUMANN HLD N AKT (SAUHF), MWI Veterinary Supply (MWIV - Analyst Report) and Align Technology (ALGN - Analyst Report). SAUHF carries a Zacks Rank #1 (Strong Buy), while MWIV and ALGN carry a Zacks Rank #2 (Buy).

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