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Why Is Patterson Cos. (PDCO) Down 4.3% Since Last Earnings Report?

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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 4.3% 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 drivers.

Patterson Companies Q4 Earnings Miss, Revenues Beat

Patterson Companies reported adjusted earnings per share of 38 cents in fourth-quarter fiscal 2021, which missed the Zacks Consensus Estimate of 53 cents by 28.3%. Moreover, the bottom line declined 11.6% from the prior-year quarter.

GAAP earnings per share in the quarter was 30 cents, against the year-ago quarter’s loss of $6.44 per share.

For fiscal 2021, the company reported adjusted earnings per share of $1.61, which lagged the consensus mark of $2.06 per share. The company reported a loss of $6.25 per share in fiscal 2020.

Revenue Details

Net sales in the quarter were $1.56 billion, outpacing the Zacks Consensus Estimate by 1.4%. Also, the top line improved 21.4% year over year.

For fiscal 2021, net sales were $5.91 billion, up 7.7% from that of fiscal 2020. The figure beat the consensus mark of $5.88 billion by 0.5%.

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 fourth quarter, dental sales surged 50.4% year over year to $616 million.

Dental Consumable

Sales in the sub-segment totaled $357.2 million, up 54.3% year over year.

Dental Equipment & Software

Sales in the segment improved 64.9% on a year-over-year basis to $182.9 million.

Value-added Services and Other

This segment comprises technical service, parts and labor, software support services and office supplies. Sales at the segment climbed 13% 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 fourth quarter, the segment sales increased 10.1% on a year-over-year basis to $939.3 million.

Corporate

Sales at the segment were $6.4 million, which plunged 72.7% from $23.6 million in the year-ago quarter.

Margin Analysis

Gross profit in the reported quarter was $304.4 million, up 3.5% year over year. As a percentage of revenues, gross margin of 19.5% contracted 340 basis points (bps) on a year-over-year basis.

Operating expenses in the reported quarter amounted to $267.1 million, up 14.4% from the prior-year quarter.

The company reported operating income of $37.3 million, against the year-ago quarter’s operating loss of $614.5 million.

Financial Position

The company exited the fiscal fourth quarter with cash and cash equivalents of $143.2 million, compared with $155.9 million on a sequential basis.

Cumulative net cash used in operating activities in the fiscal fourth quarter was $730.5 million, significantly wider than the year-ago quarter’s net cash utilized in operating activities of $243.5 million.

Fiscal 2022 Earnings Outlook

Patterson Companies projects adjusted earnings per share in the range of $1.90 to $2.05. The Zacks Consensus Estimate for the same is pegged at $2.13 per share.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended downward during the past month. The consensus estimate has shifted -7.92% due to these changes.

VGM Scores

Currently, Patterson Cos. has a subpar Growth Score of D, a grade with the same score on the momentum front. 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 C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Patterson Cos. has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.


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