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Patterson Companies (PDCO) Earnings Match Estimates in Q3

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Patterson Companies Inc. (PDCO - Free Report) reported adjusted earnings per share (EPS) of 38 cents in the third quarter of fiscal 2019, in line with the Zacks Consensus Estimate. Earnings however fell 11.6% year over year.
 
Net sales in the quarter were $1.40 billion, up 1.6% year over year, meeting the Zacks Consensus Estimate.
 
Patterson Companies has a Zacks Rank #4 (Sell).
 
Segmental Analysis
 
The company currently distributes products through 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 third quarter, dental sales inched up 0.3% year over year to approximately $579.7 million.
 
Dental Consumable
 
Sales in the sub-segment totaled $294.7 million, down 2.5% year over year.
 
Dental Equipment & Software
 
Sales in the segment rose 5.1% on a year-over-year basis to $217.6 million.
 
Other
 
This segment comprises technical service, parts and labor, software support services as well as office supplies. Sales at the segment declined 1.8% on a year-over-year basis to $67.4 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.
 
Coming to the third-quarter performance of the platform, sales increased almost 1.6% on a year-over-year basis to $807.5 million.
 
Corporate
 
Sales at the segment were $9.5 million, significantly up from the year-ago $2.5 million.
 
Gross Margin Analysis
 
Gross profit in the reported quarter was $299.5 million, down 1.6% year over year. As a percentage of revenues, gross margin of 21.4% was flat year over year.
 
Operating expenses in the reported quarter totaled $254.1 million, up 3.9% on a year-over-year basis.
 
Guidance
 
For fiscal 2019, Patterson Companies expects adjusted earnings per share in the range of $1.40 to $1.45. The mid-point of the guidance of $1.42 lies below the Zacks Consensus Estimate of $1.43.
 
Our Take
 
Patterson Companies ended the third quarter of fiscal 2019 on a strong note. We are upbeat about the Animal Health segment’s solid performance of late. In fact, the Dental unit saw a year-over-year upside in the quarter as well. The company provides a wide range of consumable supplies, equipment, software and value-added services.
 
A broad spectrum of products cushions the company against economic downturns in the MedTech space. We believe that a diverse product portfolio, strong veterinary business prospects, accretive acquisitions and strategic partnerships are key catalysts.
 
On the flip side, a year-over-year decline in earnings per share is discouraging. Declining Dental Consumable revenues is a concern. Management expects headwinds in the technology-based equipment business to persist through fiscal 2019.
 
Earnings of Other MedTech Majors at a Glance
 
Some better-ranked MedTech stocks that posted solid quarterly results are Varian Medical Systems (VAR - Free Report) , AngioDynamics (ANGO - Free Report) and CONMED Corp. (CNMD - Free Report) .
 
Varian reported fiscal first-quarter adjusted EPS of $1.06, in line with the Zacks Consensus Estimate. Revenues of $741 million outpaced the consensus mark of $717.9 million. The stock has a Zacks Rank #2 (Buy).
 
AngioDynamics’ fiscal second-quarter adjusted EPS of 22 cents exceeded the Zacks Consensus Estimate by a penny. Revenues totaled $91.5 million, which surpassed the consensus estimate by 2.9%. The stock sports a ZacksRank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
 
CONMED delivered fourth-quarter adjusted EPS of 73 cents, in line with the Zacks Consensus Estimate. Revenues of $242.4 million exceeded the Zacks Consensus Estimate of $229.2 million. The stock carries a Zacks Rank of 2.
 
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