Can Patterson Companies (PDCO) Surprise In Q4 Earnings?

Patterson Companies Inc. (NASDAQ:PDCO) is set to announce fourth-quarter fiscal 2016 earnings on May 26. Last quarter, the company reported earnings of 68 cents per share which beat the Zacks Consensus Estimate by a penny.

However, we note that the company has posted an average negative surprise of 3.38% over the last four quarters.

Let’s find out how things are shaping up for this quarter.

Factors at Play

Post the release of third-quarter fiscal 2016 results, Patterson Companies narrowed its adjusted earnings projection to the range of $2.42 to $2.48 per share from the previous band of $2.40–$2.50.

Although prospects of the dental and companion animals market is encouraging, sluggish growth projection for the production animal market is a concern. Nevertheless, Patterson Companies expects higher sales from CEREC, driven by the introduction of the new product (Zirconia) and growing international sales.

However, lack of operating margin expansion opportunities will hurt earnings, in our view.

Earnings Whispers

Our proven model does not conclusively show that Patterson Companies is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here as you will see below.

Zacks ESP: Patterson Companies has a Zacks ESP of 0.00%. That is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at 76 cents.

Zacks Rank: Patterson Companies has a Zacks Rank #3 which increases the predictive power of ESP; but when combined with a 0.00% ESP, it makes surprise prediction difficult.

Meanwhile, we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Here are some companies you may want to consider as our model shows they have the right combination of elements to post an earnings beat this quarter:

Air Methods (NASDAQ:AIRM) , with earnings ESP of +1.05% and a Zacks Rank #1.

CONMED (NASDAQ:CNMD) , with earnings ESP of +2.22% and a Zacks Rank #2.

Laboratory Corp. of America Holdings (NYSE:LH) , with earnings ESP of +.87% and a Zacks Rank #2.