On Jul 3, we retained our Neutral recommendation on
Patterson Companies Inc.
), following its modest fourth-quarter fiscal 2013 results.
Although the core Dental business witnessed moderate improvement,
tempered sales of the Vet and Medical businesses disappoint us.
BECTON DICKINSO (BDX): Free Stock Analysis
CONMED CORP (CNMD): Free Stock Analysis
COOPER COS (COO): Free Stock Analysis Report
PATTERSON COS (PDCO): Free Stock Analysis
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Why the Retention?
On May 23, Patterson posted fourth-quarter fiscal 2013 earnings
of 62 cents per share, up 6.9% year over year. Earnings were in
line with the Zacks Consensus Estimate. Revenues grew 3.1% to
$964.9 million, but were lower than the Zacks Consensus Estimate
of $967 million.
Following the release of the quarterly results, the Zacks
Consensus Estimate for 2014 dropped 2.7% to $2.18 per share. The
Zacks Consensus Estimate for 2015 also declined significantly
(down 4%) to $2.41.
We are impressed with the improvement in the core Dental business
on the back of higher technology equipment sales. Although Dental
consumable sales were up in the quarter, it is too early to state
that the underlying market has recovered. We are also upbeat
regarding the distribution agreement with Sirona and contribution
from new products, including CEREC.
Additionally, Patterson remains committed to leveraging investor
return through dividend hikes and share repurchases.
However, health care reform related uncertainties continue to
plague Patterson Medical. The Veterinary business is benefiting
from increasing demand in the U.S. but needs to address its
internal issues to avoid losing market share. Continued decline
in operating margin also concerns us. We remain cautious about
intense competition and an uncertain macro economy.
Other Stocks to Consider
While we see no clear directional pressure on Patterson,
Becton, Dickinson and Company
The Cooper Companies
) are expected to do well in the medical industry. All these
stocks carry a Zacks Rank #2 (Buy).