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What's in Store for Patterson Companies' (PDCO) Q2 Earnings?

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Patterson Companies, Inc.’s (PDCO - Free Report) second-quarter fiscal 2019 results are expected to release on Nov 29, before the market opens.

The quarterly results are likely to reflect a decline in the core Dental segment, partially offset by growth in other segments.

Fiscal Q1 at a Glance

In the last reported quarter, Patterson Companies reported adjusted earnings of 26 cents per share, missing the Zacks Consensus Estimate of 35 cents. Earnings declined 40.9% year over year.

The company recorded revenues worth $1.34 billion, up 2.5% year over year. The figure edged past the Zacks Consensus Estimate of $1.31 billion.

Patterson Companies has average negative earnings surprise of 11.7% for the trailing four quarters.

Which Way Are Estimates Headed?

For the quarter to be reported, the Zacks Consensus Estimate for revenues is pegged at $1.41 billion, reflecting growth of 1.8% on a year-over-year basis. The same for earnings per share is pinned at 36 cents, reflecting a year-over-year decline of 29.4%.

Let’s delve deeper to see how things are shaping up before the earnings release.

Dental Segment to Show Weakness

Patterson’s Dental unit, which supplies basic and advanced technology dental equipment, is likely to see a soft quarter. For investors’ notice, management expects the segment’s margins to get affected by pricing pressure. In the last reported quarter, Patterson Dental accounted for 37.9% of net sales. Revenues at the segment declined 2.5% year over year to $506.1 million owing to pricing pressures.

For the quarter to be reported, the Zacks Consensus Estimate for the segment’s revenues is pegged at $545 million, showing a 1.6% drop from the prior-year quarter.

Coming to subsegments, the Zacks Consensus Estimate for sales from consumable and printed products stands at $299 million, reflecting a decline of 3.9% on a year-over-year basis. However, the same for equipment and software is pinned at $175 million, up 2.9% from a year ago.

Per management, Patterson Companies is in process of stabilizing the Dental segment and believes that fiscal 2019 will be a transition year for the unit.

Other Factors at Play

Patterson Companies’ Animal Health segment, a leading distributor of veterinary supplies, is likely to put up a solid show in the quarter to be reported. We expect consumable and private label businesses to see robust growth in the fiscal second quarter.

In the last reported quarter, the segment contributed 61.8% to total sales. Revenues at the segment totaled $825.2 million, up 6.3% on a year-over-year basis, driven by Companion and Production businesses and sales in consumables. Per management, Animal Health private label business grew significantly in the quarter.

The Zacks Consensus Estimate is pinned at $869 million, showing a 5.5% rise from the year-ago quarter.

Coming to subsegments, the Zacks Consensus Estimate for sales from consumables stands at $849 million, showing a 5.5% increase sequentially. The same for equipment and software sales is pegged at $12.9 million, reflecting 7.9% sequential growth.

However, Patterson Companies faces stiff competition from another national, full-service firm, Henry Schein Dental, a unit of Henry Schein (HSIC - Free Report) . In addition, there are at least 15 full-service distributors that operate on a regional level and hundreds of small local distributors.

What Does Our Model Say?

Per our proven model, a stock needs to have a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) to deliver a positive earnings surprise in the quarter. However, this is not the case here.

Earnings ESP: Patterson Companies has an Earnings ESP of 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Patterson Companies carries a Zacks Rank #3.

Please note that we caution against stocks with a Zacks Rank #4 (Sell) or 5 (Strong Sell) going into the earnings announcement, especially when the company is seeing negative estimate revision.

Stocks Worth a Look

Here are a few stocks worth considering as they have the right combination of elements to post an earnings beat this quarter.

The Cooper Companies (COO - Free Report) has an Earnings ESP of +2.26% and a Zacks Rank #3.

Burlington Stores, Inc. (BURL - Free Report) has an Earnings ESP of +3.01% and a Zacks Rank #2.

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