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Patterson Cos. (PDCO) Up 9.1% Since Last Earnings Report: Can It Continue?

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A month has gone by since the last earnings report for Patterson Cos. (PDCO - Free Report) . Shares have added about 9.1% in that time frame, outperforming the S&P 500.

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

Patterson Companies Q3 Earnings Top Estimates, Up Y/Y

Patterson Companies, Inc. reported adjusted earnings per share of 58 cents in third-quarter fiscal 2021, which beat the Zacks Consensus Estimate of 51 cents by 13.7%. Moreover, the bottom line improved 23.4% from the prior-year quarter. The upside can be attributed to sustained expense discipline during quarter under review, better operating margins across both business segments and solid sales execution.

Revenue Details

Net sales in the quarter were $1.55 billion, outpacing the Zacks Consensus Estimate by 4.1%. Also, the top line increased 6.5% 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 third quarter, dental sales grew 3.6% year over year to $648.9 million.

Dental Consumable

Sales in the sub-segment totaled $342.6 million, up 13.6% year over year.

Dental Equipment & Software

Sales in the segment fell 6.2% on a year-over-year basis to $237.1 million.

Other

This segment comprises technical service, parts and labor, software support services and office supplies. Sales at the segment declined 3.9% on a year-over-year basis to $69.3 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 third quarter, the segment sales rose 9.4% on a year-over-year basis to $894.3 million.

Corporate

Sales at the segment were $7.9 million, which plunged 35.1% from $12.3 million in the year-ago quarter.

Margin Analysis

Gross profit in the reported quarter was $324.5 million, up 4.1% year over year. As a percentage of revenues, gross margin of 20.9% contracted 50 basis points (bps) on a year-over-year basis.

Operating expenses in the reported quarter totaled $262.9 million, declining 1.9% from the prior-year quarter.

The company reported operating income of $61.7 million, up 40.8% from the year-ago quarter. As a percentage of revenues, operating margin of 3.9% expanded 90 bps on a year-over-year basis.

Financial Position

The company exited the fiscal third quarter with cash and cash equivalents of $155.9 million, up from $139.5 million on a sequential basis.

Cumulative net cash used in operating activities in the fiscal third quarter were $604.9 million, significantly wider than the year-ago quarter’s net cash utilized in operating activities of $168.9 million.

Guidance

Patterson Companies refrained from issuing fourth-quarter 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 review have trended upward during the past month.

VGM Scores

At this time, Patterson Cos. has a poor Growth Score of F, however its Momentum Score is doing a lot better with a C. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. 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. Notably, Patterson Cos. has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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