Patterson Companies (PDCO) Earnings Beat Estimates In Q1

Patterson Companies, Inc. (NASDAQ:PDCO) reported adjusted earnings per share (EPS) of 27 cents in the first quarter of fiscal 2020, which beat the Zacks Consensus Estimate by 8%. Moreover, the bottom line improved 3.8% year over year.

Net sales in the quarter were $1.33 billion, missing the Zacks Consensus Estimate by 2.9%. Further, the figure declined 0.6% year over year.

Segmental Analysis

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

Dental Segment

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

In the first quarter, dental sales declined 1% year over year to approximately $501.1 million.

Dental Consumable

Sales in the sub-segment totaled $302 million, down 0.7% year over year.

Dental Equipment & Software

Sales in the segment fell 6.9% on a year-over-year basis to $125.7 million.

Other

This segment comprises technical service, parts and labor, software support services and office supplies. Sales at the segment improved 9.8% on a year-over-year basis to $73.4 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 first-quarter performance of the platform, sales declined 0.9% on a year-over-year basis to $817.5 million.

Corporate

Sales at the segment were $9.9 million, soaring 97.9% from the year-ago quarter’s figure of $5 million.

Gross Margin Analysis

Gross profit in the reported quarter was $290.1 million, up 2.3% year over year. As a percentage of revenues, gross margin of 21.8%, improved 60 bps year over year.

Operating expenses in the reported quarter totaled $273.4 million, down 2.1% on a year-over-year basis.

Operating income came in at $16.7 million, which improved a whopping 269.4% from the year-ago quarter. Operating margin of 1.3% improved 100 bps from the prior-year quarter.

Fiscal 2020 Guidance

For fiscal 2020, Patterson Companies continues to expect adjusted earnings per share in the range of $1.33 to $1.43. The mid-point of the guidance of $1.38 is in line with the Zacks Consensus Estimate.

Our Take

Patterson Companies ended the first quarter of fiscal 2020 on a mixed note. The company’s consistent efforts to drive profitability in its core business were represented by the performance displayed in reported quarter. Expansion in both gross and operating margins is a positive. The Corporate segment exhibited significant growth in sales in the quarter under review. 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.

Meanwhile, declining Dental Consumable revenues remains a concern.

Zacks Rank

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

Earnings of Other MedTech Majors at a Glance

Some better-ranked stocks which posted solid results this earning season are CONMED Corporation (NASDAQ:CNMD) , Baxter International Inc. (NYSE:BAX) and Intuitive Surgical, Inc. (NASDAQ:ISRG) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

CONMED delivered second-quarter 2019 adjusted earnings per share of 56 cents, which beat the Zacks Consensus Estimate of 53 cents by 5.7%. Revenues of $238.3 million surpassed the Zacks Consensus Estimate by 2.2%.

Baxter delivered third-quarter 2019 adjusted earnings of 89 cents per share, which surpassed the Zacks Consensus Estimate of 81 cents by 9.9%. Revenues of $2.84 billion outpaced the Zacks Consensus Estimate of $2.79 billion by 1.9%.

Intuitive Surgical reported third-quarter 2019 adjusted earnings per share of $3.25, which beat the Zacks Consensus Estimate of $2.85. Revenues were $1.1 billion, surpassing the Zacks Consensus Estimate of $1.03 billion.

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