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Patterson Companies (PDCO) Q3 Earnings Beat, Revenues Lag

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Patterson Companies, Inc. (PDCO - Free Report) reported adjusted earnings per share (EPS) of 55 cents in third-quarter fiscal 2022, which surpassed the Zacks Consensus Estimate of 50 cents by 10%. However, the bottom line declined 5.2% from the prior-year quarter.

GAAP EPS in the quarter was 58 cents, up 16% from the prior-year quarter.

Revenue Details

Net sales in the quarter were $1.59 billion, which lagged the Zacks Consensus Estimate by 1.8%. The top line, however, improved 2.9% 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 inched up 0.3% year over year to $650.6 million.

Dental Consumable

Sales in the sub-segment totaled $337.2 million, down 1.6% year over year.

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

Dental Equipment & Software

Sales in the segment rose 1.8% on a year-over-year basis to $241.4 million.

Value-added Services and Other

This segment comprises technical service, parts and labor, software support services and office supplies. Sales at the segment rose 4.2% on a year-over-year basis to $72.1 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 increased 5.6% on a year-over-year basis to $944.8 million.

Corporate

Sales at the segment were $1.2 million, down 85.1% from the year-ago quarter’s sales of $7.9 million.

Margin Analysis

Gross profit in the reported quarter was $336.6 million, up 3.7% year over year. As a percentage of revenues, gross margin of 21.1% expanded 20 basis points (bps) on a year-over-year basis.

Operating expenses in the reported quarter amounted to $275.8 million, up 4.9% from the prior-year quarter.

The company reported an operating income of $60.8 million, down 1.4% from the year-ago quarter. As a percentage of revenues, operating margin of 3.8% contracted 10 bps on a year-over-year basis.

Financial Position

The company exited the fiscal third quarter with cash and cash equivalents of $165 million, compared with $481.8 million on a sequential basis.

Cumulative net cash used in operating activities at the end of the fiscal third quarter was $834.1 million, noticeably wider than the year-ago quarter’s net cash utilized in operating activities of $604.9 million.

Fiscal 2022 Earnings Outlook Raised

Patterson Companies updated its earnings outlook for fiscal 2022. The company now projects adjusted EPS in the range of $2.08 to $2.13 (up from the prior range of $2.00 to $2.10). The Zacks Consensus Estimate for the same is pegged at $2.08 per share.

Our Take

Patterson Companies ended third-quarter fiscal 2022 on a mixed note, wherein earnings beat the consensus mark, but revenues missed the same. The company witnessed a solid performance in the Animal Health segment in the quarter under review. Apart from Dental Consumables, the Dental business showed improvement. Prudent cost savings approach and solid sales execution worked in favor of the stock. Sustained momentum in the Animal Health business and the company’s solid position in the market got reflected in the fiscal third-quarter results. A raised earnings outlook for fiscal 2022 is encouraging. Expansion in gross margin is another plus.

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.

However, rise in operating expenses is discouraging. Contraction in operating margin remains a headwind.

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 announced quarterly results are Henry Schein, Inc. (HSIC - Free Report) , Quidel Corporation (QDEL - Free Report) and Bio-Rad Laboratories, Inc. (BIO - Free Report) .

Henry Schein, carrying a Zacks Rank #2 (Buy), reported fourth-quarter 2021 adjusted earnings of $1.07 per share, which beat the Zacks Consensus Estimate by 18.9%. Revenues of $3.33 billion outpaced the consensus mark by 4.7%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Henry Schein has an estimated long-term growth rate of 11.8%. HSIC surpassed earnings estimates in each of the trailing four quarters, the average surprise being 25.5%.

Quidel reported fourth-quarter 2021 adjusted EPS of $7.29, which surpassed the Zacks Consensus Estimate by 49.1%. Fourth-quarter revenues of $636.9 million outpaced the Zacks Consensus Estimate by 0.3%. It currently carries a Zacks Rank #1.

Quidel’s earnings yield of 8.4% compares favorably with the industry’s (0.7%). QDEL surpassed earnings estimates in two of the trailing four quarters and missed twice, the average surprise being 129.4%.

Bio-Rad reported fourth-quarter 2021 adjusted EPS of $3.21, which surpassed the Zacks Consensus Estimate by 11.9%. Fourth-quarter revenues of $732.8 million outpaced the Zacks Consensus Estimate by 0.5%. It currently has a Zacks Rank #2.

Bio-Rad has an earnings yield of 2.3%, which compares favorably with the industry’s negative yield. BIO surpassed earnings estimates in each of the trailing four quarters, the average surprise being 66.9%.