Patterson Companies, Inc.
), a leading distributor of dental, veterinarian and
rehabilitation medical supplies, is scheduled to report its
second-quarter fiscal 2014 earnings on Nov 21, 2013. Last
quarter, it had posted a negative surprise of 6.25%. Let's see
how things are shaping up for this announcement.
Factors to Consider This Quarter
Patterson began the fiscal year on a disappointing note,
reflecting a challenging macro environment. The company had
missed the Zacks Consensus Estimate at both fronts in the fiscal
Declining revenues from the core Patterson Dental segment due to
drop in sales of equipment and software offerings are the prime
cause of concern. However, management asserts that the dental
equipment business will deliver incremental returns for the rest
of fiscal 2014 on the back of new products and rising demand. We
note that Patterson's peer
Henry Schein, Inc.
) had reported a 5.7% year-over-year rise in revenues from its
global Dental business in the last reported quarter.
Moving on, Patterson's Veterinary business is growing at a
healthy pace and we believe that this division should continue to
grow on the back of new products and the NVS acquisition. PDCO's
MWI Veterinary Supply, Inc.
), a U.S.-based veterinary products company, reported encouraging
top-line growth of 9.7% in its fiscal 2013 fourth-quarter results
declared on Nov 7.
However, Patterson's margins remain under pressure. Despite its
long-term benefits, the decision to divest certain non-core
products from the Patterson Medical unit is likely to accelerate
operating expenses in the near term. However, the Medical
business is geared to grow in the long-term on the back of its
advanced products portfolio as well as underlying favorable
Our proven model does not conclusively show that Medtronic 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.
Negative Zacks ESP
: The Most Accurate estimate stands at 47 cents while the Zacks
Consensus Estimate is pegged higher at 48 cents. Hence the
difference is -2.08%.
Zacks Rank #4 (Sell)
: Patterson's Zacks Rank #4 when combined with a negative ESP
makes surprise prediction difficult. We caution against stocks
with a Zacks Rank #4 and 5 (Sell-rated stocks) going into the
earnings announcement, especially when the company is seeing
negative estimate revisions momentum.
Other Stocks to Consider
However, a company in the medical product industry that, as per
our model, has the right combination of elements to post earnings
beat this quarter is:
), earnings ESP of +2.04% and a Zacks Rank #3 (Hold).
CYBERONICS INC (CYBX): Free Stock Analysis
HENRY SCHEIN IN (HSIC): Free Stock Analysis
MWI VET SUPPLY (MWIV): Free Stock Analysis
PATTERSON COS (PDCO): Free Stock Analysis
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