Patterson Companies, Inc.
) has risen nearly 19% since January 2012 and is hovering around
its 52-week high of $35.66. This distributor of dental,
veterinarian and rehabilitation medical supplies exited fiscal 2012
on a high note with both sales and earnings sailing past Zacks
Consensus Estimates on the back of a strong North American dental
Along with these positives, this Zacks #2 Rank (Buy) company's 1.6%
dividend yield and a continuous share buyback program make its
stock a good pick for investors looking for both growth and income.
Fourth Quarter Results
On May 24, Patterson reported fourth quarter fiscal 2012 adjusted
earnings per share of 58 cents, beating the Zacks Consensus
Estimate by a penny and the year-ago earnings of 53 cents per
share. For fiscal 2012, adjusted earnings of $1.92 per share beat
the Zacks Consensus Estimate by a penny and exceeded the prior
year's EPS of $1.89.
Revenues for the fourth quarter rose 6% year over year to $936.3
million, beating the Zacks Consensus Estimate of $914 million. The
upside was driven by robust performance across the three segments -
Dental Supply (grew 4%), Rehabilitation Supply (3%) and Veterinary
Supply (13%). Sales from the Webster Veterinary unit were boosted
by the August 2011 acquisition of American Veterinary Supply
Corporation that accounted for approximately 2% of the unit's sales
For the fiscal year, revenues grew 3.5% to $3,535.7 million,
slightly above the Zacks Consensus Estimate of $3,510 million. An
additional sales week in the first quarter of fiscal 2011 had an
adverse impact on year-over-year comparison by approximately 2
Gross margin dropped 90 basis points year over year to 33.5% in the
fourth quarter. In addition, a 5.5% rise in operating expenses to
$210.9 million led to an 80 bps contraction in operating margin to
For fiscal 2013 the company forecasts EPS between $2.10 and $2.16,
representing year-over-year growth of 9.4% to 12.5%. While the
dental consumables and equipment markets are expected to grow by 2%
to 3% and 5 to 7%, respectively, the companion pet veterinary
market is slated for 3 to 4% growth during fiscal 2013. However,
the global rehabilitation market is expected to remain flat.
Estimates Inch Up
Patterson is expected to report first quarter fiscal 2013 results
on August 23, 2012. The Zacks Consensus Estimate for fiscal 2013
remained unchanged at $2.14, slightly below the company's guidance.
However, the Zacks Consensus Estimate for fiscal 2014 has increased
by 2.0% to $2.36 over the last 30 days, representing a
year-over-year jump of 10.6%.
Enhancing Shareholder Value
In March 2012, Patterson hiked its quarterly dividend by 16.7% to
14 cents per share, representing a decent yield of 1.6%. In
contrast, the average dividend yield of the industry is only 0.4%.
Since the company initiated its dividend in March 2010 with 10
cents per share, dividends have grown at a compound annual growth
rate of 18.0%. The company's dividend payout ratio has also gone up
from 22.0% in fiscal 2010 to approximately 28.6% in the current
The company returned over $400 million to its shareholders in
fiscal 2012 including share buybacks and quarterly dividends.
Patterson's valuation looks compelling compared to its peers by
most metrics. Based on 2013 earnings estimates, the company is
trading at a price-to-earnings (P/E) of 16.40x, a nominal discount
to the peer group average of 16.52x. The price-to-book of 2.83x is
at an 8.1% discount to the peer group average of 3.08x. Valuation
looks attractive with respect to the price-to-sales (P/Sales) ratio
as well. The P/Sales ratio of the company stood at 1.09, a 34.7%
discount to the peer group average of 1.67.
Chart Reflects Strength
The stock has been consistently trading above its 200-day moving
average since January 19, 2012. Barring occasional pullbacks, the
stock has been above its 50-day moving average since the beginning
of the year. Patterson, which competes with players such as Henry
) and MWI Veterinary Supply (
), has also outperformed the S&P 500 since April 30, 2012. The
one-year return for the stock is roughly 10.3% compared to a 3.5%
return from the S&P 500 index.
Headquartered in St. Paul, Minnesota, Patterson Companies Inc.
(PDCO) is a leading distributor of dental, companion-pet
veterinarian, and rehabilitation supply in the US and Canada.
Patterson Dental is the company's largest business segment and one
of the two largest distributors of dental products in North
America. Patterson is also the only national dealer for A-dec
equipment that is the largest manufacturer of dental equipment in
the U.S. It has a market capitalization of $3.71 billion.
PATTERSON COS (PDCO): Free Stock Analysis
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