Patterson Companies (PDCO) Q1 Earnings Meet Estimates

Patterson Companies Inc. (NASDAQ:PDCO) reported first-quarter fiscal 2017 adjusted earnings of 51 cents per share from continuing operations, which were in line with the Zacks Consensus Estimate. The figure also improved 8.5% year over year on higher sales.

Quarter Details

Net sales from continuing operations increased 16.6% (23.3% at constant exchange rate or CER) year over year to $1.33 billion, which beat the Zacks Consensus Estimate of $1.32 billion. The year-over-year improvement reflected robust performance by the Animal Health platform.

Coming to the Animal Health platform, sales at Patterson Companies’ this segment (57% of total sales) surged almost 36.8% on a year-over-year basis to $762.6 million on the back of a 38.3% increase in consumable products sales. Sales of equipment and software of this platform climbed 2.6% year over year. However, the other services and products on this platform witnessed a year-over-year decline of 9.1% in sales.

The year-over-year upside in this platform was driven by strong performance delivered by Patterson’s production animal business and the U.S. companion animal business. Livestock end markets also contributed to this platform’s growth in the reported quarter.

Sales in Patterson Companies’ Dental platform (43% of total sales) decreased 3.5% to $555 million approximately. However, sales grew 2.1% at CER. Consumable sales at the dental platform dropped 7% to $332.9 million on a year-over-year basis, while sales from other services and products decreased 3%. However, sales from dental equipment and software rose 5%..

Within the dental platform, management witnessed strong growth in equipment sales volumes as well as strong demand for technology adoption. Further, to address a transformation observed in the purchasing patterns of this platform’s customers, the company adopted the ‘go-to-market’ strategy. .

Margin Details

Gross margin contracted 140 basis points (bps) to 23.8% in the reported quarter.

Adjusted operating expenses, as a percentage of revenues, decreased 90 bps to 18.9%. However, adjusted operating margin contracted 50 bps to 4.9%.

Outlook

Patterson Companies reaffirmed its adjusted earnings for fiscal 2017 in the range of $2.60--$2.70 per share, including $25 million incremental operating expenses related to the ERP implementation. The company expects North American and international markets to remain stable through fiscal 2017. The current Zacks Consensus Estimate for fiscal 2017 stands at $2.65, in line with the mid-point of the company provided guidance.

Zacks Rank & Key Picks

Patterson Companies currently has a Zacks Rank #4 (Sell).

Better-ranked stocks in the broader medical sector are Halyard Health (NYSE:HYH) , Masimo Corp. (NASDAQ:MASI) and IDEXX Laboratories Inc (NASDAQ:IDXX) . Notably, all the three stocks sport a Zacks Rank #1 (Strong Buy).