Patterson Companies Inc.
) first-quarter fiscal 2014 earnings per share (EPS) of 45 cents
per share was flat year over year and missed the Zacks Consensus
Estimate by 3 cents. The company's planned investment in IT
lowered EPS by a cent. In the reported quarter, net income
declined 3.4% to $45.9 million from $47.5 million in the year-ago
Revenues for the first quarter dropped marginally by 1% to $880.1
million from $889.2 million reported in the first quarter of
fiscal 2014. Revenues were lower than the Zacks Consensus
Estimate of $918 million.
Gross margin was 32.0% in the quarter, slightly lower than 32.1%
in the prior-year quarter. Operating margin was also lower at
9.2% versus 9.3% in the comparable year-ago period.
Revenues from the core
declined 2.3% to $554.2 million due to a difficult year-over-year
comparisons as the year-ago quarter had benefited from the CEREC
trade-up program. Within Patterson Dental, sales of consumable
and printed products grew 3.3% to $320.3 million in the
However, sales from the equipment and software offerings
declined 11.7% to $169.6 million. Other services and products
revenues also dipped 1.4% to $64.4 million.
On a positive note, revenues from
segment rose 4.5% to $199.7 million. The unit gained from a 4%
rise in consumable sales along with double-digit growth in the
equipment and software category. Recently, the business announced
its decision to purchase the largest veterinary distributor in
the U.S., National Veterinary Services Limited (NVS) from Dechra
segment dropped 3.5% to $126.2 million due to soft sales in the
overseas market. The division continues to be adversely impacted
by the uncertainties persisting in the global healthcare economy.
Management announced a strategic initiative to divest some
non-core products from its medical unit, which is expected to
result in a pre-tax restructuring charge in the band of $15
million-$17 million, or about 12 cents per share.
A majority of the expenses will be borne by the company in the
second quarter of fiscal 2014. Following the successful
completion of the divestment, the company is likely to generate
operational savings of roughly $2 million or 1 cent per share
from fiscal 2015.
ALIGN TECH INC (ALGN): Free Stock Analysis
COOPER COS (COO): Free Stock Analysis Report
MWI VET SUPPLY (MWIV): Free Stock Analysis
PATTERSON COS (PDCO): Free Stock Analysis
To read this article on Zacks.com click here.
Balance Sheet and Other
Patterson exited the first quarter with cash and cash equivalents
of $603.4 million, up 19.4% from $505.2 million as of Apr 27,
2013. Long-term debt remained flat at $725 million as of Jul 27,
2013 compared with the same as of Apr 27, 2013.
In the reported quarter, Patterson repurchased roughly 0.5
million shares under its share buyback program. About 23.9
million shares are still available for repurchase before the
authorization expires in 2018. PDCO also paid $29.8 million in
cash dividends to its shareholders.
PDCO has updated its EPS guidance to the range of $2.13-$2.24 per
share for fiscal 2014, which now includes 3 cents-4 cents benefit
from the NVS acquisition. However, the outlook does not include
restructuring charges of 12 cents. The current Zacks Consensus
Estimate for EPS for fiscal 2014 is pegged at $2.19.
We remain disappointed with Patterson's fiscal 2014 first quarter
results, which missed the Zacks Consensus Estimates on both
fronts, reflecting a challenging macro environment. The core
dental business faced difficult year-over-year comparisons;
however, management is confident that the business will deliver
incremental returns for the rest of fiscal 2014 on the back of
new products (CEREC Omnicam) and rising demand.
We also note that the Veterinary business grew modestly in the
quarter, reflecting a tailwind in the underlying market. Despite
uncertainties in the Medical business, the segment is geared to
grow in the long-term on the back of its advanced products
portfolio as well as utilize the underlying favorable
demographics. Further, the company's restructuring effort to
streamline the business should leverage the bottom line in the
Patterson carries a Zacks Rank #2 (Buy). Other medical stocks
that are worth considering include
MWI Veterinary Supply
The Cooper Companies
). All these stocks carry a Zacks Rank #2 (Buy).