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Patterson Companies (PDCO) Q1 Earnings Top Estimates, Up Y/Y

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Patterson Companies, Inc. (PDCO - Free Report) reported adjusted earnings per share (EPS) of 33 cents in first-quarter fiscal 2021, which beat the Zacks Consensus Estimate by 50%. Moreover, the bottom line improved 22.2% from the prior-year quarter. The improvement can be attributed to the benefit of temporary COVID-19 related expense savings and sequentially improving sales during the quarter under review.

Revenue Details

Net sales in the quarter were $1.25 billion, outpacing the Zacks Consensus Estimate by 4.8%. However, the top line declined 6.2% year over year.

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 first quarter, dental sales fell 14.1% year over year to $430.3 million.

Dental Consumable

Sales in the sub-segment totaled $256.6 million, down 15.4% year over year.

Dental Equipment & Software

Sales in the segment declined 10.1% on a year-over-year basis to $112.9 million.

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

Other

This segment comprises technical service, parts and labor, software support services and office supplies. Sales at the segment declined 15.6% on a year-over-year basis to $60.7 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 first quarter, the segment sales dipped 0.7% on a year-over-year basis to $812.2 million.

Corporate

Sales at the segment were $3.4 million, which plunged 66% from $9.9 million in the year-ago quarter.

Margin Analysis

Gross profit in the reported quarter was $253.8 million, down 12.5% year over year. As a percentage of revenues, gross margin of 20.4% contracted 140 basis points (bps) on a year-over-year basis.

Operating expenses in the reported quarter totaled $215.9 million, declining 21% from the year-ago quarter.  

The company reported operating income of $37.9 million, up 127.1% from the prior-year quarter. As a percentage of revenues, operating margin of 3% expanded 170 bps on a year-over-year basis.

Financial Position

The company exited the fiscal first quarter with cash and cash equivalents of $119.6 million, up 53.4% on a sequential basis.

Net cash used in operating activities in the fiscal first quarter were $229.8 million, wider than the year-ago quarter’s net cash utilized in operating activities of $45.2 million.

Fiscal 2021 Guidance

Patterson Companies refrained from issuing fiscal 2021 financial guidance at this time citing the persistent uncertainty with respect to the COVID-19 pandemic.

Our Take

Patterson Companies ended first-quarter fiscal 2021 on a strong note, wherein both earnings and revenues beat the consensus mark. However, the company’s Dental and Animal Health segments displayed a dismal performance in the reported quarter. The company also witnessed contraction in gross margin in the quarter under review.

Nonetheless, prudent cost savings approach and operational execution worked well for the stock. Also, despite ongoing market disruption resulting from the pandemic, the company’s Dental and Animal Health segments witnessed recovery. This was attributable to the improvement in year-over-year sales performance in each fiscal month throughout the fiscal first quarter.

Also, 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.

Zacks Rank

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

Earnings of Other MedTech Majors at a Glance

Some better-ranked stocks in the broader medical space that have already announced their quarterly results are Thermo Fisher Scientific Inc. (TMO - Free Report) , PerkinElmer, Inc. (PKI - Free Report) and West Pharmaceutical Services, Inc. (WST - Free Report) . While both PerkinElmer and West Pharmaceuticals sport a Zacks Rank of 1 (Strong Buy), Thermo Fisher carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

PerkinElmer reported second-quarter 2020 adjusted EPS of $1.57, which surpassed the Zacks Consensus Estimate by 68.8%. Revenues of $811.7 million outpaced the consensus mark by 1.3%.

West Pharmaceuticals reported second-quarter 2020 adjusted EPS of $1.25, outpacing the Zacks Consensus Estimate of 91 cents. Revenues of $527.2 million surpassed the consensus mark by 6.9%.

Thermo Fisher reported second-quarter 2020 adjusted EPS of $3.89, beating the Zacks Consensus Estimate by 45.7%. Revenues of $6.92 billion surpassed the consensus mark by 0.1%.

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