Patterson Companies Inc.
), a Minnesota-based distributor of dental, veterinarian and
rehabilitation medical supplies, is slated to report its second
quarter fiscal 2013 results before trading begins on Tuesday,
Analysts polled by Zacks are currently expecting earnings per
share of 49 cents on revenues of $894 million. Earnings forecast
represent an estimated 5.43% year-over-year increase, indicating
an optimistic outlook.
With respect to earnings surprises, the company missed the Zacks
Consensus Estimates in two of the last four quarters, while it
met estimates in one and beat the same in the other quarter. The
company recorded an average negative earnings surprise of 2.85%
over the prior four quarters.
First Quarter Recap
Patterson posted moderate first-quarter results, with earnings
missing the Zacks Consensus Estimate. However, revenues surpassed
the Zacks Consensus Estimate with a year-over-year increase of 5%
to approximately $889.2 million.
With respect to business segments, revenues from Patterson Dental
grew 6% year over year to $567.4 million. Sales from the
equipment and software offerings jumped 19% to $191.9 million,
boosted by higher sales of CEREC products and basic equipment.
Dental consumable and printed product sales inched up 1% to
Revenues from the Webster Veterinary Supply unit increased 6.5%
year over year to $191.1 million, led by the acquisition of the
American Veterinary Supply Corporation.
However, revenues from Patterson Medical segment dropped 3% to
$130.7 million due to lower equipment sales. The division's
equipment franchise continues to be adversely impacted by the
uncertainty related to the U.S. health care system. In addition,
currency fluctuations overshadowed the contributions from
Estimate Revisions Trend
There is a slight positive bias in estimate revisions for both
the October quarter as well as the full year. There have been no
estimate revisions in the past 7 days in either direction.
However, for the past 30 days, 1 out of the 12 estimates has
moved upward, while none moved in the opposite direction.
The past 7 days have seen no estimate revision in either
direction for fiscal 2013. However, in the past 30 days, 2 out of
the 13 estimates climbed up for the year, while none moved in the
For the second quarter of fiscal 2013, the Zacks Consensus
Estimate for earnings per share increased by a penny to 49 cents
in the last 30 days. However, for the last 7 days, it remained
unchanged at 49 cents.
For full-year fiscal 2013, the Zacks Consensus Estimate for
earnings per share increased by a penny to $2.12 in the last 30
days. However, for the last 7 days, it remained unchanged at
Neutral on Patterson Co.
We currently have a Neutral recommendation on the stock, which
carries a short-term Zacks #2 Rank (Buy).
Patterson provides a variety of consumables, equipment and
software and value-added services to its customers. The company's
wide range of products hedges it from any meaningful sales
Patterson Dental is the company's largest business segment and
one of the two largest distributors of dental products in North
America. The recent acquisition of Iowa Dental Supply, LLC (IDS),
a full service distributor of dental products, will likely boost
Patterson Dental's foothold in the mid-western U.S. markets and
provide a competitive edge to the company.
Moreover, the alliance with Sirona Dental Systems, a leading
dental technologies company, further bolsters Patterson Dental's
leading position in the North American dental distribution
business. The Omnicare camera for the CEREC system, developed by
Sirona and to be distributed by Patterson, is the latest growth
driver for this product line.
Although Patterson's Rehabilitation/Medical Supply business is
poised to be a key long-term growth driver, the unfavorable
impact of the proposed changes in the U.S. health care system, is
adversely affecting equipment sales. This is expected to continue
in fiscal 2013. Furthermore, the company believes that the
Veterinary business could be negatively impacted by a change in
distribution agreement with a nutritional vendor.
Moreover, higher sales of lower margin dental equipments
(compared to lower sales of higher margin consumable products)
along with veterinary products are generating pressure on gross
margin. The company expects consumable sales from the dental
business to be a drag due to a weak global economy (especially
Europe), high unemployment rate and a complete lack of consumer
Patterson faces significant competition in the dental market,
), which carries a short-term Zacks #3 Rank (Hold). In order to
counter the competitive pressure, the company needs to continue
introducing new products. Failure to do so will dilute its market
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