On Mar 15, we retained
Patterson Companies Inc.
) at Neutral, following its third-quarter fiscal 2013 results.
Although results were in-line, the company needs to address its
internal issues to avoid losing market share.
Why the Retention?
On Feb 21, Patterson posted third-quarter fiscal 2013 adjusted
earnings of 52 cents per share, up 4% year-over-year. Earnings
were in line with the Zacks Consensus Estimate. Revenues grew
2.3% to $915.9 million, marginally exceeding the Zacks Consensus
Estimate of $915 million.
Following the release of the quarterly results, the Zacks
Consensus Estimate for 2013 edged down 0.5% to $2.03 per share.
However, the Zacks Consensus Estimate for 2014 remained unchanged
at $2.26. With the Zacks Consensus Estimates for both 2013 and
2014 showing no clear directional pressure on the stock in the
near term, the company now has a Zacks Rank #3 (Hold).
Patterson is benefiting from higher technology equipment sales
in the Dental equipment business but is facing sluggish dental
consumable sales. The Veterinary business is also experiencing an
increase in demand in the U.S. but needs to address its internal
issues to avoid losing market share. We are also upbeat regarding
the company's distribution agreement with Sirona. New products
are expected to drive near-term growth.
Moreover, Patterson's sustained investment in infrastructure
should boost operational efficiencies to offset pressure on
margins. However, health care reform related uncertainties
continue to plague the company. We remain cautious about intense
competition and an overall weak macro economy.
Other Stocks to Consider
While we see no clear directional pressure on Patterson,
Medical Action Industries
), carrying a Zacks Rank #1 (Strong Buy), as well as
Becton, Dickinson and Company
The Cooper Companies
), which carry a Zacks Rank #2 (Buy), are expected to do well in
the medical industry.
BECTON DICKINSO (BDX): Free Stock Analysis
COOPER COS (COO): Free Stock Analysis Report
MEDICAL ACTION (MDCI): Free Stock Analysis
PATTERSON COS (PDCO): Free Stock Analysis
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