Patterson Companies, Inc.’s PDCO first-quarter fiscal 2019 results are expected to release on Aug 30, before the market opens.
The quarterly results are likely to reflect a decline in the core Dental segment, partially offset by growth in other segments.
Earnings Surprise History
Patterson Companies has an average negative earnings surprise of 4.7% for the trailing four quarters.
In the last reported quarter, the company reported adjusted earnings of 30 cents per share, in line with the Zacks Consensus Estimate. Earnings fell 56.5% year over year. Net sales dipped 3.1% from the year-ago quarter’s tally to $1.40 billion and missed the Zacks Consensus Estimate of $1.43 billion. Lower sales and gross margin contraction marred results in the reported quarter.
Patterson Companies, Inc. Price and EPS Surprise
Patterson Companies, Inc. Price and EPS Surprise | Patterson Companies, Inc. Quote
Which Way are the Estimates Treading?
For the quarter to be reported, the Zacks Consensus Estimate for revenues is pegged at $1.31 billion, reflecting growth of 0.3% on a year-over-year basis. The same for earnings per share (EPS) is pinned at 35 cents, reflecting year-over-year decline of 20.5%.
Let’s delve deeper to check how are things shaping up before the earnings release.
Dental Segment to Show Weakness
In the last reported quarter, the segment accounted for 40% of total sales. Revenues in the segment came in at $545.8 million, down 10.1% at constant currency (cc).
For investors’ notice, the dental segment is going through a significant sales force change. Despite this, management expects an improvement in performance in the dental segment in fiscal 2019. In fact, the company is in the process of rolling out a new sales productivity tool with its dental field sales organization. The company announced that it will continue to invest and increase the number of sales reps, especially CAD and CAM specialists. However, sales growth in the segment is expected to be sluggish for the quarter to be reported due to changes in sales force and disruptions from enterprise resource planning implementation.
For the quarter to be reported, the Zacks Consensus Estimate for the segment’s revenues is pegged at $500 million, which shows a decline of 3.7% on a year-over-year basis.
Coming to the major sub-segments within Dental, the Dental Consumables segment posted revenues of $318 million in the last reported quarter, down 6.3% year over year. Sales were up 0.4% at cc. For the quarter to be reported, the Zacks Consensus Estimate for the sub-segment’s revenues is pinned at $307 million, indicating a fall of 4.1% from the prior-year quarter’s tally.
Meanwhile, revenues in the Equipment and Software segment declined 19.8% on a year-over-year basis to $156 million. Sales were up 0.4% at cc. For the quarter to be reported, the Zacks Consensus Estimate for the segment’s revenues is pegged at $122 million, indicating a fall of 4.7% on a year-over-year basis.
Other Factors at Play
Animal Health Segment
Per management, though Patterson’s core Animal Health segment faced product mix-related challenges in the last reported quarter, it contributed 60.5% to total sales. Furthermore, sales rose 2.5% on a year-over-year basis to $794.9 million.
Patterson Companies’ Animal Health continues to benefit from stable growing end-markets. We expect the company to improve product mix in the segment and incorporate cost-effective management.
However, for the quarter to be reported, the Zacks Consensus Estimate for revenues is pegged at $802 million, down 5.3% sequentially.
Coming to the major sub-segments within Animal Health, Animal Health Consumable is expected to see some softness in terms of revenue growth. The Zacks Consensus Estimate for the sub-segment’s sales is pinned at $785 million, showing a fall of 5.1% sequentially.
Patterson Technology Center
Patterson Companies' solid technology support infrastructure, the Patterson Technology Center in Effingham Ill, helps it strengthen customer base. Per management, it is the only company that boasts specially trained staff dedicated exclusively to the sale and support of technology.
The Patterson Technology Center supports more than 80,000 customers nationwide and resolves hardware, software, computer networking or digital technology issues very fast. In fact, management confirmed the receipt of the title of technology leader, courtesy of consistent research, development and technology upgrade as well as support to keep pace with growing demand for greater efficiency and profitability for healthcare practices.
Strong growth in technology is likely to provide the company with a competitive edge in the MedTech space.
What Does Our Model Predict?
Our quantitative model does not show a beat for Patterson Companies this earnings season. This is because a stock needs to have a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) to be able to beat estimates.
Earnings ESP: The Earnings ESP for Patterson is -0.26%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: Patterson carries a Zacks Rank #3 (Hold).
Stocks Worth a Look
Here are a few stocks worth considering as they have the right combination of elements to post an earnings beat this quarter.
Burlington Stores, Inc BURL has an Earnings ESP of +1.04% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.
Dollar Tree, Inc DLTR has an Earnings ESP of +1.54% and a Zacks Rank #2.
Ross Stores, Inc ROST has an Earnings ESP of +2.91% and a Zacks Rank #3.
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