Patterson Companies Down to Sell - Analyst Blog


On Mar 12, 2014, Zacks Investment Research downgraded Patterson Companies, Inc. ( PDCO ) to a Zacks Rank #4 (Sell) from a Zacks Rank #3 (Hold).

Why the Downgrade?

On Feb 20, Patterson Companies, Inc. ( PDCO ) reported its operating results for the fiscal 2014 third-quarter ended Jan 25, 2014 with a 9.6% rise in adjusted earnings per share to 57 cents, which were in line with the Zacks Consensus Estimate.

Revenues in the quarter increased 18.2% to $1,082.7 million, which exceeded the Zacks Consensus Estimate by $20.7 million. Revenues from the core Patterson Dental rose 3.2% on a constant currency basis to $642.0 million whereas revenues from Patterson Veterinary surged about 90% to $333.4 million. However, revenues from Patterson Medical dipped 5.8% to $107.3 million.

The decline in Patterson Medical's sales performance was primarily due to the divestment of non-core product lines in the fiscal first quarter as well as continuing challenges in the unit's international business.

Patterson Companies narrowed its earnings guidance range for fiscal 2014 to $2.13-$2.20 from the prior range of $2.13-$2.24 per share. The restructuring is anticipated to be completed by the end of the year and is likely to reduce fiscal year earnings by 12 cents per share. The company reported negative earnings surprises in 2 of the last 4 quarters with an average miss of 3.9%.

Subsequently, the company has seen a negative trend in earnings estimate revision in the past one month. For fiscal 2014, three estimates moved down in the past 30 days, with no upward revision.

Patterson Companies continues to face a challenging macro environment due to uncertainties surrounding the U.S. healthcare system as well as the ongoing austerity measures that have dampened demand for the past few years. The long-term expected earnings growth for this stock is lower at 10.8% as compared to the industry growth of 13.9%.

Other Stocks to Consider

Some better-ranked stocks in the medical/dental supply industry include Align Technology Inc. ( ALGN ), CR Bard Inc. ( BCR ), and Becton, Dickinson and Co. ( BDX ). All the three stocks hold a Zacks Rank #2 (Buy).

ALIGN TECH INC (ALGN): Free Stock Analysis Report

BARD C R INC (BCR): Free Stock Analysis Report

BECTON DICKINSO (BDX): Free Stock Analysis Report

PATTERSON COS (PDCO): Free Stock Analysis Report

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Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

This article appears in: Investing , Business , Stocks

Referenced Stocks: ALGN , BCR , BDX , PDCO

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