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Patterson Cos. (PDCO) Up 1.8% 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 1.8% in that time frame, underperforming 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 catalysts.

Patterson Companies Q3 Earnings Beat, Revenues Lag

Patterson Companies, Inc. reported adjusted earnings per share 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.

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.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates flatlined during the past month.

VGM Scores

At this time, Patterson Cos. has a poor Growth Score of F, a grade with the same score on the momentum front. However, 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 F. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

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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