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Analyst Blog

On Nov 30, we issued an updated research report on St. Paul, MN-based Patterson Companies Inc. (PDCO - Free Report) – a leading distributor of dental and animal health products. The company currently carries a Zacks Rank #4 (Sell).

Patterson Companies represents a negative return of 14.3% year to date, much lower than the S&P 500’s almost 7.6% over the same time frame. In fact, over the last seven days, the Zacks Consensus Estimate for full-year 2016 earnings decreased by 11 cents to $2.31 per share, with one estimate moving down.

Meanwhile, Patterson Companies has been an underperformer in the Zacks Categorized Dental Supplies sub-industry as well. The stock represented a return of roughly -17.4% in the past three months, wider than the -7.9% return of the sub-industry.

Notably, Patterson Companies recorded a negative earnings surprise of roughly 8.2% in the last reported quarter.

The company ended second-quarter fiscal 2017 on a dismal note, missing the Zacks Consensus Estimate for both the top and the bottom line. Also, a lackluster performance by the company’s Dental platform is a dampener.

Of the other adverse factors, unfavorable foreign exchange and higher operating expenses are major concerns.

Additionally, the U.S. dental products distribution industry is highly competitive, which poses a major threat to Patterson Companies. Notably, the U.S. dental products distribution industry consists of national, regional and local full-service and mail-order distributors like Henry Schein Dental, a national, full-service firm and a unit of Henry Schein.

However, an estimated sales growth rate for of 6.82% for the current year buoys optimism for the stock, as it is better than the industry average of 5.35%.

Zacks Rank & Other Key Picks

Better-ranked stocks in the broader medical space include HMS Holdings Corp. (HMSY - Free Report) , Medidata Solutions Inc. (MDSO - Free Report) and IDEXX Laboratories, Inc. (IDXX - Free Report) . Notably, HMS Holdings and Medidata Solutions carry a Zacks Rank #2 while IDEXX Laboratories sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

HMS Holdings has a long-term expected growth rate of 14.26%. Notably, the company has a solid one-year return of roughly 43.7%.

Medidata Solutions has a strong one-year return of roughly 23.4%. The stock represents a long-term expected growth rate of 22.33%.

IDEXX Laboratories represents a solid one-year return of almost 63.7%. The company has a long-term expected growth rate of almost 14.96%.

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