Will Patterson Companies (PDCO) Earnings Disappoint in Q4? - Analyst Blog

Patterson Companies, Inc. ( PDCO ) is slated to release its third-quarter fiscal 2015 financial numbers after the closing bell on Feb 19.

Last time, Patterson Companies reported a decent fiscal second quarter, beating the Zacks Consensus Estimate on both lines. The dental and veterinary segments performed well, positively contributing to the company's business.

Moreover, over the trailing four quarters, the company has posted a positive average earnings surprise of 0.58%.

Let's see how things are shaping up for this announcement.

Factors to be Considered this Quarter

Over the past few quarters, core dental equipment sales have been improving substantially for Patterson Companies, on the back of partnerships with equipment manufacturers. We expect this trend to continue even in the third quarter. Although we are encouraged with this growth, it must be kept in mind that industry-wide growth has still not recovered to the levels before 2008.

We feel the strategic partnerships with Quality Systems and Abaxis will help improve the prospects of Patterson's dental and veterinary segment, respectively. At the same time, Patterson Companies continues to gain significant market share from their previous acquisition of NVS.

In addition, the company recently announced an agreement to acquire Holt Dental Supply. The takeover is expected to expand Patterson Dental's local reach while also enhancing its Midwest domination.

Patterson Companies medical business is poised to earn greater market share as market fundamentals slowly improve.

Patterson Companies reiterated its earnings per share (EPS) projection for fiscal 2015 at $2.20-$2.30. Management is optimistic that the second half of the fiscal will bring forth higher sales volume.

Earnings Whispers

Our proven model does not conclusively show that Patterson Companies is likely to beat the Zacks Consensus Estimate this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. Unfortunately, that is not the case here as elaborated below.

Zacks ESP : Earnings ESP represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate. This leads to an ESP of -1.70% for Patterson Companies as the Most Accurate estimate for earnings stands at 58 cents while the consensus estimate is pegged higher at 59 cents.

Zacks Rank : Patterson Companies has a Zacks Rank #3 which increases the predictive power of ESP. However, we need to have a positive ESP to be confident of an earnings surprise.

Note that we caution against stocks with Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Here are some companies in the broader medical sector that you may consider instead as our model shows they have the right combination of elements to post an earnings beat this quarter.

BioTelemetry, Inc. ( BEAT ) has an earnings ESP of +20.00% and carries a Zacks Rank #1.

ACADIA Pharmaceuticals Inc. ( ACAD ) has an earnings ESP of +3.85% and carries a Zacks Rank #2.

Endo International plc ( ENDP ) has an earnings ESP of +0.89% and carries a Zacks Rank #2.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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