We reiterate our recommendation for
Patterson Companies Inc.
) at Neutral. Its second quarter fiscal 2013 adjusted earnings of
44 cents per share (up 2.3% year-over-year) missed the Zacks
Consensus Estimate of 49 cents.
Sales for the fiscal second quarter edged up 1% year over year
to $867.2 million, trailing the Zacks Consensus Estimate of $894
million. Sales were adversely affected by soft dental equipment
sales (including chairs and lighting), partially offset by strong
technology equipment sales. However, the Veterinary business
contributed significantly to total sales.
Revenues from the core Patterson Dental remained approximately
flat year over year at $549.1 million. Within Patterson Dental,
sales of consumable and printed products inched up 1% to $315.4
million in the quarter. Sales from the equipment and software
offerings unexpectedly dropped 3.2% to $169.3 million. Higher
demand for the CEREC system, which has been incorporated with the
latest Omnicam camera, was constrained by limited product
availability. This offset higher technology products sales. Other
services and products grew 1.6% year over year to $64.5
Revenues from the Webster Veterinary segment grew 6.8% to
$184.4 million. Internally-generated sales jumped 13% in the
reported quarter. Revenues from Patterson Medical segment
remained flat year over year at $133.7 million due to lower
equipment sales. Surgical Synergies, the company acquired by
Patterson in April 2012, contributed 1% to the sales growth of
this business segment. This division's equipment franchise
continues to be adversely impacted by the uncertainties related
to the U.S. health care system.
For fiscal 2013, Patterson lowered its earnings forecast to
the range of $2.00 to $2.06 per share from the earlier range of
$2.10 to $2.16 per share due to the company's disappointing
second-quarter results as well as the persisting macroeconomic
Patterson provides a wide range of consumables, equipment and
software, and value-added services to its customers. Patterson
competes head-to-head with
Henry Schein Inc.
) in the dental market.
Patterson Dental is the company's largest business segment and
one of the two largest distributors of dental products in North
America. The recent acquisition of Iowa Dental Supply, LLC (IDS),
a full service distributor of dental products, will likely boost
Patterson Dental's foothold in the mid-western U.S. market and
provide a competitive edge as well.
Moreover, the alliance with
Sirona Dental Systems Inc.
), a leading dental technologies company, further bolsters
Patterson Dental's leading position in the North American dental
distribution business. The Omnicam camera for the CEREC system,
developed by Sirona and to be distributed by Patterson, is the
latest growth driver for this product line.
However, the company remains affected by tough macroeconomic
issues in North America and international markets. It is also
facing internal operational shortcomings, which need to be
addressed. The stock carries a short-term Zacks #4 Rank (Sell).
HENRY SCHEIN IN (HSIC): Free Stock Analysis
PATTERSON COS (PDCO): Free Stock Analysis
SIRONA DENTAL (SIRO): Free Stock Analysis
To read this article on Zacks.com click here.