Patterson Cos. (PDCO) Down 7.4% Since Last Earnings Report: Can It Rebound?

It has been about a month since the last earnings report for Patterson Cos. (PDCO). Shares have lost about 7.4% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Patterson Cos. due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Patterson Companies (NASDAQ:PDCO) Q1 Earnings Top Estimates, Up Y/Y

Patterson Companies, Inc. reported adjusted earnings per share of 33 cents in first-quarter fiscal 2021, which beat the Zacks Consensus Estimate by 50%. Moreover, the bottom line improved 22.2% from the prior-year quarter. The improvement can be attributed to the benefit of temporary COVID-19 related expense savings and sequentially improving sales during the quarter under review.

Revenue Details

Net sales in the quarter were $1.25 billion, outpacing the Zacks Consensus Estimate by 4.8%. However, the top line declined 6.2% 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 first quarter, dental sales fell 14.1% year over year to $430.3 million.

Dental Consumable

Sales in the sub-segment totaled $256.6 million, down 15.4% year over year.

Dental Equipment & Software

Sales in the segment declined 10.1% on a year-over-year basis to $112.9 million.

Other

This segment comprises technical service, parts and labor, software support services and office supplies. Sales at the segment declined 15.6% on a year-over-year basis to $60.7 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 fiscal first quarter, the segment sales dipped 0.7% on a year-over-year basis to $812.2 million.

Corporate

Sales at the segment were $3.4 million, which plunged 66% from $9.9 million in the year-ago quarter.

Margin Analysis

Gross profit in the reported quarter was $253.8 million, down 12.5% year over year. As a percentage of revenues, gross margin of 20.4% contracted 140 basis points (bps) on a year-over-year basis.

Operating expenses in the reported quarter totaled $215.9 million, declining 21% from the year-ago quarter.

The company reported operating income of $37.9 million, up 127.1% from the prior-year quarter. As a percentage of revenues, operating margin of 3% expanded 170 bps on a year-over-year basis.

Financial Position

The company exited the fiscal first quarter with cash and cash equivalents of $119.6 million, up 53.4% on a sequential basis.

Net cash used in operating activities in the fiscal first quarter were $229.8 million, wider than the year-ago quarter’s net cash utilized in operating activities of $45.2 million.

Fiscal 2021 Guidance

Patterson Companies refrained from issuing fiscal 2021 financial guidance at this time citing the persistent uncertainty with respect to the COVID-19 pandemic.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in estimates revision. The consensus estimate has shifted 14.72% due to these changes.

VGM Scores

Currently, Patterson Cos. has an average Growth Score of C, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Patterson Cos. has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

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