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Patterson Cos. (PDCO) Down 7.4% Since Last Earnings Report: Can It Rebound?

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It has been about a month since the last earnings report for Patterson Cos. (PDCO - Free Report) . Shares have lost about 7.4% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Patterson Cos. due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Patterson Companies Q2 Earnings Top Estimates, Up Y/Y

Patterson Companies, Inc. reported adjusted earnings per share of 63 cents in second-quarter fiscal 2021, which beat the Zacks Consensus Estimate by 65.8%. Moreover, the bottom line improved 61.5% from the prior-year quarter. The upside came on the back of sustained expense discipline, enhanced mix and solid sales execution.

Revenue Details

Net sales in the quarter were $1.55 billion, outpacing the Zacks Consensus Estimate by 8.8%. Also, the top line increased 9.5% 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 second quarter, dental sales grew 11.9% year over year to $631.7 million.

Dental Consumable

Sales in the sub-segment totaled $357.8 million, up 17.5% year over year.

Dental Equipment & Software

Sales in the segment climbed 5.3% on a year-over-year basis to $198.1 million.

Other

This segment comprises technical service, parts and labor, software support services and office supplies. Sales at the segment increased 5.5% on a year-over-year basis to $75.8 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 second quarter, the segment sales rose 7.8% on a year-over-year basis to $914.2 million.

Corporate

Sales at the segment were $7.2 million, which improved 21.7% from $5.9 million in the year-ago quarter.

Margin Analysis

Gross profit in the reported quarter was $320.4 million, up 6.3% year over year. As a percentage of revenues, gross margin of 20.6% contracted 70 basis points (bps) on a year-over-year basis.

Operating expenses in the reported quarter totaled $246.7 million, declining 22.8% from the prior-year quarter.

The company reported operating income of $73.7 million, against the year-ago quarter’s operating loss of $18.1 million.

Financial Position

The company exited the fiscal second quarter with cash and cash equivalents of $139.5 million, up from $119.6 million on a sequential basis.

Cumulative net cash used in operating activities in the fiscal second quarter were $423 million, significantly wider than the year-ago quarter’s net cash utilized in operating activities of $14.7 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 and its impact on business operations.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended upward during the past month. The consensus estimate has shifted 15.25% due to these changes.

VGM Scores

Currently, Patterson Cos. has an average Growth Score of C, however its Momentum Score is doing a bit better with a B. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Patterson Cos. has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.


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