Patterson Companies (PDCO) Q1 Earnings & Sales Miss Estimates

Patterson Companies, Inc. PDCO reported adjusted earnings per share (EPS) of 32 cents for first-quarter fiscal 2023, which missed the Zacks Consensus Estimate of 38 cents by 15.8%. The bottom line decreased 25.6% from the prior-year quarter.

GAAP EPS in the quarter was 25 cents, down 28.6% from the prior-year quarter.

Revenue Details

Net sales in the quarter were $1.52 billion, which lagged the Zacks Consensus Estimate by 2.6%. The top line decreased 5.7% year over year.

Segmental Analysis

The company currently distributes products through subsidiaries — Patterson Dental and Patterson Animal Health.

Dental Segment

This segment provides a complete range of consumable dental products, equipment, software, turnkey digital solutions and value-added services to dentists and laboratories throughout North America.

In the fiscal first quarter, dental sales decreased 8.1% year over year to $557.9 million.

Dental Consumable

Sales in the sub-segment totaled $337.8 million, down 10.3% year over year.

Patterson Companies, Inc. Price, Consensus and EPS Surprise

Patterson Companies, Inc. Price, Consensus and EPS Surprise

Patterson Companies, Inc. price-consensus-eps-surprise-chart | Patterson Companies, Inc. Quote

Dental Equipment & Software

Sales in the segment declined 6.7% on a year-over-year basis to $146.5 million.

Value-added Services and Other

This segment comprises technical service, parts and labor, software support services and office supplies. Sales at the segment fell 2.4% on a year-over-year basis to $87.6 million.

Animal Health Segment

This segment is a leading distributor of veterinary supplies to clinics, public and private institutions and shelters across the United States.

In the fiscal first quarter, the segment sales decreased 4.2% on a year-over-year basis to $960.3 million.

Corporate

Sales at the segment were $5 million compared with $5.2 million in the year-ago quarter.

Margin Analysis

Gross profit in the reported quarter was $312.1 million, up 12.4% year over year. As a percentage of revenues, the gross margin of 20.5% expanded approximately 330 basis points (bps) on a year-over-year basis.

Operating expenses in the reported quarter amounted to $277.3 million, down 12.6% from the prior-year quarter.

The company reported an operating income of $34.8 million against an operating loss of $39.5 million in the year-ago quarter.

Financial Position

The company exited the fiscal first quarter with cash and cash equivalents of $149.6 million, compared with $142 million on a sequential basis.

Cumulative net cash used in operating activities at the end of the fiscal first quarter was $302.5 million compared with the year-ago quarter’s net cash utilized in operating activities of $313.4 million.

Fiscal 2023 Earnings Outlook

Patterson Companies maintained its earnings outlook for fiscal 2023. The company projects adjusted EPS in the range of $2.25 to $2.35. The Zacks Consensus Estimate for the same is pegged at $2.30 per share.

Our Take

Patterson Companies ended first-quarter fiscal 2023 on a dismal note, wherein both earnings and revenues missed the consensus mark. The company also witnessed a decline in the performance of both its segments in the quarter under review, a key reason being currency movement. A prudent cost-savings approach and solid sales execution worked in favor of the stock, expanding gross margin. Sustained momentum in the Animal Health business bodes well.

A broad spectrum of products cushions the company against economic downturns in the MedTech space. We believe that a diverse product portfolio, strong veterinary business prospects, accretive acquisitions and strategic partnerships are key catalysts.

Zacks Rank

Patterson Companies currently carries a Zacks Rank #2 (Buy).

Earnings of Other MedTech Majors at a Glance

Some stocks in the broader medical space that have announced quarterly results are Bio-Rad Laboratories, Inc. BIO, AMN Healthcare Services, Inc. AMN and McKesson MCK.

Bio-Rad, carrying a Zacks Rank #2, reported second-quarter 2022 adjusted EPS of $3.38, which beat the Zacks Consensus Estimate by 37.4%. Revenues of $691 million outpaced the consensus mark by 3.9%. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

Bio-Rad has a historical earnings growth rate of 31.2%. BIO’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 46.75%.

AMN Healthcare, sporting a Zacks Rank #1, reported second-quarter 2022 adjusted EPS of $3.31, which beat the Zacks Consensus Estimate by 11.8%. Revenues of $1.43 billion outpaced the consensus mark by 4.8%.

AMN Healthcare has an estimated long-term growth rate of 3.2%. AMN’s earnings surpassed estimates in the trailing four quarters, the average surprise being 15.66%.

McKesson reported fiscal first-quarter 2023 adjusted EPS of $5.83, which surpassed the Zacks Consensus Estimate by 9.8%. Revenues of $67.2 billion outpaced the Zacks Consensus Estimate by 5.2%. It currently has a Zacks Rank of 2.

McKesson has an earnings yield of 6.6% compared with the industry’s yield of 4.5%. MCK’s earnings surpassed estimates in three of the trailing four quarters and missed once, the average surprise being 13%.

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