Patterson Companies, Inc.
) is set to report its fourth-quarter fiscal 2014 earnings results
before the opening bell on May 22, 2014. Last quarter, the company
had reported earnings in line with expectations. Let's see how
things are shaping up for this announcement.
Factors at Play
In its third-quarter fiscal 2014, Patterson had reported
adjusted earnings of 57 cents per share, beating the company's
prior-year quarter earnings by 9.6%. However, the bottom line was
on par with the Zacks Consensus Estimate.
During the reported quarter, Patterson's revenues increased 18.2%
year over year to $1.1 billion, exceeding the the Zacks Consensus
Estimate of $1,062 million. The growth was driven by solid
improvement in the company's dental and veterinary businesses.
Impressive top-line improvement and management's strong cost
controls were the primary driving forces behind the company's
better-than-expected earnings growth.
However, management expects the company's sales in this
quarter to be adversely affected by extreme weather
conditions across all of its U.S.-based businesses.
Category wise, Patterson experienced 2.5% year-over-year growth in
its Dental supply revenues to $641.9 million, with a 5.6% rise in
its equipment and software sales. The Veterinary supply revenues
grew 90.1% to $333.4 million, with an impressive 28% rise in
equipment and software sales.
However, sales growth from Patterson's Rehabilitation unit declined
5.8% to $107.3 million, due to the divestiture of the non-core
product line in the first quarter of fiscal 2014. Also, excluding
the results of NVS acquisition, the company's adjusted gross margin
declined 40 basis points to 32.4% in the reported quarter, compared
to the prior- year period. This decline was a result of the faster
relative growth of the U.S. veterinary unit, the higher percentage
of equipment sales in the dental segment and pricing pressures in
the international portion of the medical business.
Based on its performance, management has lowered its earnings
guidance to the range of $2.13-$2.20 per share for fiscal 2014,
from the earlier range of $2.13-$2.24 per share. The Zacks
Consensus Estimate of $2.16 lies within the guided range.
Our proven model does not conclusively show that Patterson is
likely to beat earnings this quarter. That is because a stock needs
to have both a positive
and a Zacks Rank of #1, 2 or 3 for this to happen. That is not the
case here as you will see below.
: Patterson has a negative Zacks ESP. That is because the
Most Accurate estimate stands at 64 cents while the Zacks Consensus
Estimate is pegged higher at 66 cents. That leads to a difference
: Patterson has a Zacks Rank #4 (Sell) which lowers the predictive
power of ESP. We caution against stocks with Zacks Ranks #4 and 5
(Sell-rated stocks) going into the earnings announcement,
especially when the company is seeing negative estimate revisions
Other Stocks to Consider
Here are some companies you may want to consider instead as our
model shows they have the right combination of elements to post an
earnings beat this quarter:
), earnings ESP of +2.00% and a Zacks Rank #1 (Strong Buy).
), earnings ESP of +33.33% and a Zacks Rank #2 (Buy).
), earnings ESP of +0.66% and a Zacks Rank #2.
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