Patterson Companies (PDCO) Q2 Earnings Surpass Estimates

Patterson Companies, Inc. (NASDAQ:PDCO) reported adjusted earnings per share (EPS) of 39 cents in second-quarter fiscal 2020, which beat the Zacks Consensus Estimate by 11.4%. However, the bottom line remained flat year over year.

Net sales in the quarter were $1.42 billion, outpacing the Zacks Consensus Estimate by 0.2%. Moreover, the figure rose 1% 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 fiscal second quarter, dental sales improved 4.1% year over year to approximately $564.6 million.

Dental Consumable

Sales in the sub-segment totaled $303.1 million, down 0.2% year over year.

Dental Equipment & Software

Sales in the segment improved 12.2% on a year-over-year basis to $188.2 million.

Other

This segment comprises technical service, parts and labor, software support services and office supplies. Sales at the segment improved 3.2% on a year-over-year basis to $73.3 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.
In the second quarter, the segment sales declined 0.8% on a year-over-year basis to $848.2 million.

Corporate

Sales at the segment were $5.9 million, down 12.8% from the year-ago quarter’s figure of $6.8 million.

Gross Margin Analysis

Gross profit in the reported quarter was $301.5 million, up 2.2% year over year. As a percentage of revenues, gross margin of 21.3%, improved 30 bps year over year.

Operating expenses in the reported quarter totaled $319.6 million, up 25.9% on a year-over-year basis.

Operating loss came in at $18.1 million, against the year-ago quarter’s operating income of $41.2 million.

Fiscal 2020 Guidance Raised

For fiscal 2020, Patterson Companies now expects adjusted earnings per share in the range of $1.36 to $1.46 (up from the prior range of $1.33-$1.43). The mid-point of the guidance of $1.41 is above the Zacks Consensus Estimate of $1.38 per share.

Our Take

Patterson Companies ended second-quarter fiscal 2020 on a strong note, wherein both earnings and revenues beat the consensus mark. The company’s Dental segment performed impressively. The company’s consistent efforts to drive profitability in its core business were represented by the performance displayed in reported quarter. Expansion in gross margin is a positive. Moreover, raised outlook for fiscal 2020 instills optimism in the stock.

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. Further, the Corporate segment performed sluggishly in the quarter under review.

Zacks Rank

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

Earnings of Other MedTech Majors at a Glance

Some better-ranked stocks that reported solid results this earning season are Edwards Lifesciences (NYSE:EW) , Thermo Fisher Scientific Inc. (NYSE:TMO) and ResMed Inc. (NYSE:RMD) . You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Edwards Lifesciences delivered third-quarter 2019 adjusted EPS of $1.41, outpacing the Zacks Consensus Estimate by 15.6%. Third-quarter net sales of $1.09 billion surpassed the Zacks Consensus Estimate by 5.5%. The stock carries a Zacks Rank of 2 (Buy).

Thermo Fisher delivered third-quarter 2019 adjusted EPS of $2.94, which surpassed the Zacks Consensus Estimate by 2.1%. Revenues of $6.27 billion outpaced the Zacks Consensus Estimate by 1.3%. The stock carries a Zacks Rank #2.

ResMed reported third-quarter 2019 adjusted EPS of 93 cents, which beat the Zacks Consensus Estimate of 87 cents by 6.9%. Revenues were $681.1 million, surpassing the Zacks Consensus Estimate by 3.6%. The stock sports a Zacks Rank of 1.

More Stock News: This Is Bigger than the iPhone!

It could become the mother of all technological revolutions. Apple (NASDAQ:AAPL) sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.

Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020.

Click here for the 6 trades >>