February 22, 2024

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Patterson Cos. (PDCO) Up 17.2% Since Last Earnings Report: Can It Continue?

It has been about a month since the last earnings report for Patterson Cos. (PDCO). Shares have added about 17.2% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Patterson Cos. due for a pullback? 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 Q4 Earnings Top Estimates, Up Y/Y

Patterson Companies, Inc. reported adjusted earnings per share of 43 cents in fourth-quarter fiscal 2020, which beat the Zacks Consensus Estimate by 152.9%. Moreover, the bottom line improved 16.2% from the prior-year quarter.

For full-year fiscal 2020, the company reported adjusted EPS of $1.55, up 10.7% from the prior-year period. The figure surpassed the consensus mark by 20.2%.

Revenue Details

Net sales in the quarter were $1.29 billion, outpacing the Zacks Consensus Estimate by 1.9%. However, the top line declined 10.5% year over year.

For full-year fiscal 2020, the company delivered revenues of $5.49 billion, down 1.5% from fiscal 2019. Nonetheless, the figure surpassed the Zacks Consensus Estimate by 0.4%.

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 fourth quarter, dental sales fell 27.3% year over year to $409.6 million.

Dental Consumable

Sales in the sub-segment totaled $230.5 million, down 26.1% year over year.

Dental Equipment & Software

Sales in the segment plunged 36.5% on a year-over-year basis to $110.8 million.

Other

This segment comprises technical service, parts and labor, software support services and office supplies. Sales at the segment declined 11.2% on a year-over-year basis to $68.3 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 fiscal fourth quarter, the segment sales declined 1.5% on a year-over-year basis to $853.2 million.

Corporate

Sales at the segment were $23.6 million, which increased a whopping 246.5% from $6.8 million in the year-ago quarter.

Margin Analysis

Gross profit in the reported quarter was $294 million, down 5.9% year over year. As a percentage of revenues, gross margin of 22.9% expanded 110 basis points (bps) on a year-over-year basis.

Operating expenses in the reported quarter totaled $233.4 million, declining 12.2% from the year-ago quarter.

The company reported operating loss of $614.5 million against the year-ago quarter’s operating income of $46.6 million.

Fiscal 2021 Guidance

Due to the ongoing disruption of North American and international market conditions on account of the COVID-19 pandemic, the company is unable to predict the economic effects and related government actions resulting from the same. Therefore, Patterson Companies has decided not to issue fiscal 2021 earnings guidance at this time.

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended upward during the past month. The consensus estimate has shifted 45.06% due to these changes.

VGM Scores

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

Overall, the stock has an aggregate VGM Score of A. 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. It comes with little surprise Patterson Cos. has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.

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