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Here's Why You Should Retain PDCO Stock in Your Portfolio for Now
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Patterson Companies, Inc. is well poised for growth in the coming quarters, courtesy of its broad product line. The optimism, led by a strong performance of certain business segments during first-quarter fiscal 2024 and a few notable acquisitions, is expected to contribute further. Integration risks and stiff competitive forces persist.
Shares of this Zacks Rank #3 (Hold) company have lost 26.6% so far this year compared with the industry’s 0.6% decline. The S&P 500 Index has increased 22% during the same time frame.
The renowned global dental and animal health company has a market capitalization of $1.83 billion. It projects 5.9% growth for the next five years and expects to maintain its strong performance going forward. Patterson Companies’ earnings missed the Zacks Consensus Estimate in each of the trailing four quarters, delivering an average negative surprise of 10.78%.
Image Source: Zacks Investment Research
Let’s delve deeper.
Upsides
Broad Product Spectrum: We are optimistic about Patterson Companies’ wide range of consumable supplies, equipment and software, and value-added services. A notable offering from PDCO is a private-label brand named Pivotal. It continues to add stock-keeping units to its broader private-label portfolio. The company’s NaVetor is an integrated cloud-based veterinary practice management software for its Animal Health segment.
In June, PDCO launched new integrations for DentalXChange to provide additional electronic insurance processing and electronic patient statement solutions. In May, it announced a new product, Patterson CarePay+, to provide dental offices with software solutions for patient financing, dental insurance plans and payment processing.
Acquisitions & Alliance: We are upbeat about PDCO’s strategy of expanding its business via strategic acquisitions. In September, the company announced that it has signed two separate acquisition agreements for its Animal Health business, Infusion Concepts in the United Kingdom and Mountain Vet Supply in the United States. While Infusion Concepts will help manufacture high-quality infusion pumps, Mountain Vet Supply will boost PDCO’s presence in the production and companion animal market.
In July, Patterson Dental Canada collaborated with Pearl to expand its Second Opinion AI disease detection capabilities’ reach in the Canadian dental market. By integrating Second Opinion within Patterson Dental Canada’s leading software platforms, such as Eaglesoft, Fuse and Dolphin, the partnership is aimed at elevating the standard of dental care across North America.
During 2023, Patterson Companies completed its acquisition of the Texas-based companies, Veterinary Practitioners and Animal Care Technologies, which provide innovative solutions to veterinary practices through data extraction and conversion, staffing and video-based training services.
Fulfillment Facility Modernization to Optimize Supply: PDCO started strategically modernizing its existing fulfillment facilities and capabilities. It is adding new technologies, such as robots, to automate order picking and enhance the fulfillment pace.
PDCO is also focusing on expanding its fulfillment capacity by opening next-generation centers across several countries that will help build sustainable and more efficient channel capabilities. The company’s strategic investments in fulfillment centers should help alleviate capacity constraints, boost distribution capabilities and enhance growth.
To support its facility modernization and expansion, PDCO has allocated $51.2 million in capital spending during fiscal 2024. The amount has increased 20.8% from the prior-year level.
Strong Q1 Results: Patterson Companies’ revenues and earnings missed estimates in the first quarter of fiscal 2024, reflecting the negative impact of a cybersecurity attack on its claims processing vendor, Change Healthcare. The impact will likely alleviate in the upcoming quarters, potentially improving the top and bottom-line performance. Continued growth in the production animal business supported sales in the Animal Health segment.
PDCO has been making significant investments in developing its software and value-added services offerings across its Dental and Animal Health segments. These investments are likely to drive demand for its products.
Downsides
Stiff Competition: The U.S. dental products distribution industry is highly competitive and consists chiefly of national, regional and local full-service and mail-order distributors. Patterson Companies needs to continue introducing newer products to withstand competitive pressure. Failure to do so can dilute its market share.
Integration Risks: PDCO has been on an acquisition spree, which is improving its revenue opportunities but aggravating integration risks. Regular acquisitions are also a distraction for management and are likely to impact organic growth. This may limit the company’s future expansion initiatives and worsen its risk profile.
The Zacks Consensus Estimate for fiscal 2025 revenues is pegged at $6.59 billion, indicating a 0.3% increase from the previous year’s level. The consensus mark for adjusted earnings per share is pinned at $2.33, implying a 1.3% year-over-year improvement.
DaVita has an estimated long-term growth rate of 17.5%. DVA’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 24.2%. Its shares have risen 57.3% compared with the industry’s 18.5% growth so far this year.
Quest Diagnostics has an estimated long-term growth rate of 6.2%. DGX’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 3.3%.
Quest Diagnostics’ shares have risen 8% compared with the industry’s 18.5% growth so far this year.
Boston Scientific has an estimated long-term growth rate of 12.6%. BSX’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 7.2%.
Boston Scientific’s shares have rallied 50.5% compared with the industry’s 13.5% growth so far this year.
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Here's Why You Should Retain PDCO Stock in Your Portfolio for Now
Patterson Companies, Inc. is well poised for growth in the coming quarters, courtesy of its broad product line. The optimism, led by a strong performance of certain business segments during first-quarter fiscal 2024 and a few notable acquisitions, is expected to contribute further. Integration risks and stiff competitive forces persist.
Shares of this Zacks Rank #3 (Hold) company have lost 26.6% so far this year compared with the industry’s 0.6% decline. The S&P 500 Index has increased 22% during the same time frame.
The renowned global dental and animal health company has a market capitalization of $1.83 billion. It projects 5.9% growth for the next five years and expects to maintain its strong performance going forward. Patterson Companies’ earnings missed the Zacks Consensus Estimate in each of the trailing four quarters, delivering an average negative surprise of 10.78%.
Image Source: Zacks Investment Research
Let’s delve deeper.
Upsides
Broad Product Spectrum: We are optimistic about Patterson Companies’ wide range of consumable supplies, equipment and software, and value-added services. A notable offering from PDCO is a private-label brand named Pivotal. It continues to add stock-keeping units to its broader private-label portfolio. The company’s NaVetor is an integrated cloud-based veterinary practice management software for its Animal Health segment.
In June, PDCO launched new integrations for DentalXChange to provide additional electronic insurance processing and electronic patient statement solutions. In May, it announced a new product, Patterson CarePay+, to provide dental offices with software solutions for patient financing, dental insurance plans and payment processing.
Acquisitions & Alliance: We are upbeat about PDCO’s strategy of expanding its business via strategic acquisitions. In September, the company announced that it has signed two separate acquisition agreements for its Animal Health business, Infusion Concepts in the United Kingdom and Mountain Vet Supply in the United States. While Infusion Concepts will help manufacture high-quality infusion pumps, Mountain Vet Supply will boost PDCO’s presence in the production and companion animal market.
In July, Patterson Dental Canada collaborated with Pearl to expand its Second Opinion AI disease detection capabilities’ reach in the Canadian dental market. By integrating Second Opinion within Patterson Dental Canada’s leading software platforms, such as Eaglesoft, Fuse and Dolphin, the partnership is aimed at elevating the standard of dental care across North America.
During 2023, Patterson Companies completed its acquisition of the Texas-based companies, Veterinary Practitioners and Animal Care Technologies, which provide innovative solutions to veterinary practices through data extraction and conversion, staffing and video-based training services.
Fulfillment Facility Modernization to Optimize Supply: PDCO started strategically modernizing its existing fulfillment facilities and capabilities. It is adding new technologies, such as robots, to automate order picking and enhance the fulfillment pace.
PDCO is also focusing on expanding its fulfillment capacity by opening next-generation centers across several countries that will help build sustainable and more efficient channel capabilities. The company’s strategic investments in fulfillment centers should help alleviate capacity constraints, boost distribution capabilities and enhance growth.
To support its facility modernization and expansion, PDCO has allocated $51.2 million in capital spending during fiscal 2024. The amount has increased 20.8% from the prior-year level.
Strong Q1 Results: Patterson Companies’ revenues and earnings missed estimates in the first quarter of fiscal 2024, reflecting the negative impact of a cybersecurity attack on its claims processing vendor, Change Healthcare. The impact will likely alleviate in the upcoming quarters, potentially improving the top and bottom-line performance. Continued growth in the production animal business supported sales in the Animal Health segment.
PDCO has been making significant investments in developing its software and value-added services offerings across its Dental and Animal Health segments. These investments are likely to drive demand for its products.
Downsides
Stiff Competition: The U.S. dental products distribution industry is highly competitive and consists chiefly of national, regional and local full-service and mail-order distributors. Patterson Companies needs to continue introducing newer products to withstand competitive pressure. Failure to do so can dilute its market share.
Integration Risks: PDCO has been on an acquisition spree, which is improving its revenue opportunities but aggravating integration risks. Regular acquisitions are also a distraction for management and are likely to impact organic growth. This may limit the company’s future expansion initiatives and worsen its risk profile.
Patterson Companies, Inc. Price
Patterson Companies, Inc. price | Patterson Companies, Inc. Quote
Estimate Trend
The Zacks Consensus Estimate for fiscal 2025 revenues is pegged at $6.59 billion, indicating a 0.3% increase from the previous year’s level. The consensus mark for adjusted earnings per share is pinned at $2.33, implying a 1.3% year-over-year improvement.
Stocks to Consider
Some better-ranked stocks in the broader medical space are DaVita Inc. (DVA - Free Report) , Quest Diagnostics Incorporated (DGX - Free Report) and Boston Scientific Corporation (BSX - Free Report) , each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
DaVita has an estimated long-term growth rate of 17.5%. DVA’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 24.2%. Its shares have risen 57.3% compared with the industry’s 18.5% growth so far this year.
Quest Diagnostics has an estimated long-term growth rate of 6.2%. DGX’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 3.3%.
Quest Diagnostics’ shares have risen 8% compared with the industry’s 18.5% growth so far this year.
Boston Scientific has an estimated long-term growth rate of 12.6%. BSX’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 7.2%.
Boston Scientific’s shares have rallied 50.5% compared with the industry’s 13.5% growth so far this year.