Patterson Companies Inc.
's (
PDCO
) third-quarter fiscal 2013 adjusted earnings of 52 cents per
share (up 4% year-over-year) were in line with the Zacks
Consensus Estimate. In the reported quarter, profit edged up
roughly 1% year over year to $53.6 million.
Revenue
Revenues for the third quarter grew 2.3% year over year to $915.9
million, marginally exceeding the Zacks Consensus Estimate of
$915 million. Sales were mainly led by higher technology
equipment sales from the Dental business and consumable offerings
from the Veterinary franchise as well.
The quarter had two days less than the year-ago quarter, which
lowered sales from the consumable categories in particular by
roughly 2%.
Segment Analysis
Revenues from the core Patterson Dental grew 3.5% year over year
to $626.5 million. The company was able to resolve the
supply-related issue of the industry-leading CEREC Omnicam
system, as
Sirona Dental Systems, Inc.
(
SIRO
) was able to fulfill its delivery commitments.
Within Patterson Dental, sales of consumable and printed products
inched down 0.9% to $308.7 million in the quarter. Adjusted for
the fewer selling days, sales inched up 1.2%.
Sales from the equipment and software offerings jumped 10% to
$254.0 million, led by solid technology products sales,
especially digital imaging products. Other services and products
grew 2.3% year over year to $63.8 million.
Revenues from Patterson Veterinary segment inched up 0.4% to
$175.4 million. Adjusted for the fewer selling days, sales rose
2.4% led by solid consumable supply sales. Barring the change in
a distribution agreement related to nutritional offerings in
2012, sales would have increased by an extra 7% in the quarter.
Revenues from Patterson Medical segment dropped 1.1% year over
year to roughly $114.0 million due to lower equipment sales. The
division's equipment franchise continues to be adversely impacted
by the uncertainties related to the U.S. health care system and
the international markets. Despite such uncertainties, the
segment is geared to utilize the worldwide growing trend of the
rehabilitation market.
Margins
Gross margin was 32.8% in the third quarter compared with 32.3%
in the prior-year quarter. Operating margin declined to 9.8% from
10.0%.
Balance Sheet and Other
Patterson exited the quarter with cash and cash equivalents of
$472.4 million, down 17.7% year over year. Long-term debt
remained flat at $725 million.
During the quarter, Patterson repurchased roughly 1.4 million
shares under its share buyback program. About 7 million shares
are still available for repurchase before the authorization
expires in 2016.
Guidance
The company reiterated its guidance in the range of $2.00-$2.06
per share for fiscal 2013.
Our View
Patterson provides a wide range of consumables, equipment and
software, and value-added services to its customers. Patterson
Dental is the company's largest business segment and one of the
two largest distributors of dental products in North America. We
believe that the Veterinary business can capture a considerable
market size, as the demand for veterinary care is on the rise in
the U.S.
Moreover, the alliance with Sirona, 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.
The company carries a Zacks Rank #2 (Buy). Medical/Dental
Supplies companies worth a look are
Medical Action Industries Inc.
(
MDCI
),
Henry Schein, Inc.
(
HSIC
). The former carries a Zacks Rank #1 (Strong Buy), while the
latter carries a Zacks Rank #2 (Buy).
HENRY SCHEIN IN (HSIC): Free Stock Analysis
Report
MEDICAL ACTION (MDCI): Free Stock Analysis
Report
PATTERSON COS (PDCO): Free Stock Analysis
Report
SIRONA DENTAL (SIRO): Free Stock Analysis
Report
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