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Patterson Cos. (PDCO) Up 8.5% 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 8.5% in that time frame, outperforming 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 its most recent earnings report in order to get a better handle on the important drivers.

Patterson Companies Misses on Q1 Earnings, Animal Health Unit Strong

Patterson Companies  reported adjusted earnings of 26 cents per share in first-quarter fiscal 2019, missing the Zacks Consensus Estimate of 35 cents. Earnings fell 40.9% year over year.

Net sales in the quarter were $1.34 billion, up 2.5% year over year. The figure also beat the Zacks Consensus Estimate of $1.31 billion.

Segmental Analysis

The company currently distributes its products through two subsidiaries — Patterson Dental and Patterson Animal Health.

Dental Segment

This segment provides a virtually complete range of consumable dental products, equipment, software, turnkey digital solutions and value-added services to dentists as well as laboratories throughout North America.

In the first quarter, dental sales (37.9% of total sales) declined 2.5% year over year to approximately $506.1 million. Changes in sales force, disruptions from enterprise resource planning implementation and the expansion of the company’s digital equipment portfolio hindered revenues in the segment.

Dental Consumable

Sales in the sub-segment were $304.2 million, down 5% year over year.

 

Dental Equipment & Software

Sales in the segment increased 5.5% on a year-over-year basis to $135 million.

Other

This segment comprises technical service, parts and labor, software support services as well as office supplies. Sales in the segment declined 5.5% on a year-over-year basis to $66.9 million.

Animal Health Segment

This segment is a leading distributor of products, services and technologies to the production along with companion animal health markets in North America and the U.K.

Coming to the first-quarter performance of the platform (61.8% of total sales), sales increased almost 6.3% on a year-over-year basis to $825.2 million.

Global companion animal sales rose 5.5%. Production animal sales increased 6.7%, reflecting strong performance across swine and beef-cattle segment.

Corporate

Sales in the segment were $5 million, down 45% year over year.

Gross Margin Analysis

Gross profit in the reported quarter was $283.7 million, down 5.1% year over year. As a percentage of revenues, gross margin contracted 170 basis points (bps) to 21.2% in the quarter.

Guidance

The company expects adjusted earnings per share for fiscal 2019 in the range of $1.40-$1.50, down from the previous guidance of $1.73-$1.83.

Patterson Companies expects deal amortization expenses of $31.1 million or 33 cents.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -13.75% due to these changes.

VGM Scores

Currently, Patterson Cos. has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with a D. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. 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 this revision 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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