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Reasons to Hold Patterson Companies (PDCO) in Your Portfolio Now
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Patterson Companies, Inc. (PDCO - Free Report) is well poised for growth in the coming quarters, courtesy of its broad product line. The optimism, led by a strong performance of certain business segments during fourth-quarter fiscal 2024 and a few notable acquisitions, is expected to contribute further. Integration risks and stiff competitive forces persist.
Shares of this Zacks Rank #3 (Hold) company have lost 14.2% year to date against the industry’s 0.5% growth. The S&P 500 Index has increased 9.2% during the same time frame.
The renowned global dental and animal health company has a market capitalization of $2.09 billion. It projects 4.5% growth for the next five years and expects to maintain its strong performance going forward. Patterson Companies’ earnings missed the Zacks Consensus Estimate in three of the trailing four quarters and met the same in one, delivering a negative average surprise of 4.53%.
Image Source: Zacks Investment Research
Let’s delve deeper.
Broad Product Spectrum: We are optimistic about Patterson Companies’ wide range of consumable supplies, equipment and software, and value-added services. A notable offering from PDCO is a private-label brand named Pivotal. It continues to add stock-keeping units to its broader private-label portfolio. The company’s NaVetor is an integrated cloud-based veterinary practice management software for its Animal Health segment.
In June, PDCO launched new integrations for DentalXChange to provide additional electronic insurance processing and electronic patient statement solutions. In May, it announced a new product, Patterson CarePay+, to provide dental offices with software solutions for patient financing, dental insurance plans and payment processing.
Acquisitions & Alliance: We are upbeat about PDCO’s strategy of expanding its business via strategic acquisitions. Last month, Patterson Dental Canada collaborated with Pearl to expand its Second Opinion AI disease detection capabilities’ reach in the Canadian dental market. By integrating Second Opinion within Patterson Dental Canada’s leading software platforms, such as Eaglesoft, Fuse and Dolphin, the partnership aims to elevate the standard of dental care across North America.
During 2023, Patterson Companies completed its acquisition of the Texas-based companies, Veterinary Practitioners and Animal Care Technologies, which provide innovative solutions to veterinary practices through data extraction and conversion, staffing and video-based training services. In 2022, the company announced the acquisition of substantially all the assets of Dairy Tech, Inc., which provides pasteurizing equipment and single-use bags.
Fulfillment Facility Modernization to Optimize Supply: PDCO started strategic modernization of its existing fulfillment facilities and capabilities. It is adding new technologies, such as robots, to automate order picking and enhance the fulfillment pace.
PDCO is also focusing on expanding its fulfillment capacity by opening next-generation centers across several countries that will help build sustainable and more efficient channel capabilities. The company’s strategic investments in fulfillment centers should help alleviate capacity constraints, boost distribution capabilities and enhance growth.
To support its facility modernization and expansion, PDCO has allocated $51.2 million in capital spending during fiscal 2024, up 20.8% from the year-ago period’s level.
Strong Q4 Results: Patterson Companies’ revenues and earnings missed estimates in the fourth quarter of fiscal 2024, reflecting the negative impact of a cybersecurity attack on its claims processing vendor, Change Healthcare. However, Dental consumables showed strong growth, exceeding market expectations. Strong performance in the production animal business drove sales in the Animal Health segment. PDCO has been making significant investments in developing its software and value-added services offerings across both its Dental and Animal Health segments. These are likely to drive demand for its products.
Downsides
Stiff Competition: The U.S. dental products distribution industry is highly competitive and consists chiefly of national, regional and local full-service and mail-order distributors. Patterson Companies needs to continue to introduce newer products in the market to withstand competitive pressure. Failure to do so can dilute its market share.
Integration Risks: PDCO has been on an acquisition spree, which is improving its revenue opportunities but aggravating integration risks. Regular acquisitions are also a distraction for management and likely to impact organic growth. This may limit the company’s future expansion initiatives and worsen its risk profile.
Estimate Trend
The Zacks Consensus Estimate for fiscal 2025 revenues is pegged at $6.73 billion, indicating a 2.5% increase from the previous year’s level. The consensus mark for adjusted earnings per share is pinned at $2.36, implying a 2.6% year-over-year improvement.
Some better-ranked stocks in the broader medical space that have announced quarterly results are Universal Health Services (UHS - Free Report) , Boston Scientific (BSX - Free Report) and The Cooper Companies (COO - Free Report) .
UHS’ earnings surpassed estimates in each of the trailing four quarters, the average surprise being 14.58%.
Its shares have rallied 43.3% year to date compared with the industry’s 31.4% growth.
Boston Scientific, carrying a Zacks Rank #2 (Buy) at present, has an estimated long-term growth rate of 12.6%. BSX’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 7.18%.
Boston Scientific’s shares have risen 30.7% year to date compared with the industry’s 4.1% growth.
The Cooper Companies, carrying a Zacks Rank of 2 at present, has an estimated long-term growth rate of 11.3%. COO’s earnings surpassed estimates in three of the trailing four quarters and met the same once, the average surprise being 2.50%.
The Cooper Companies’ shares have lost 1.6% year to date against the industry’s 0.6% growth.
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Reasons to Hold Patterson Companies (PDCO) in Your Portfolio Now
Patterson Companies, Inc. (PDCO - Free Report) is well poised for growth in the coming quarters, courtesy of its broad product line. The optimism, led by a strong performance of certain business segments during fourth-quarter fiscal 2024 and a few notable acquisitions, is expected to contribute further. Integration risks and stiff competitive forces persist.
Shares of this Zacks Rank #3 (Hold) company have lost 14.2% year to date against the industry’s 0.5% growth. The S&P 500 Index has increased 9.2% during the same time frame.
The renowned global dental and animal health company has a market capitalization of $2.09 billion. It projects 4.5% growth for the next five years and expects to maintain its strong performance going forward. Patterson Companies’ earnings missed the Zacks Consensus Estimate in three of the trailing four quarters and met the same in one, delivering a negative average surprise of 4.53%.
Image Source: Zacks Investment Research
Let’s delve deeper.
Broad Product Spectrum: We are optimistic about Patterson Companies’ wide range of consumable supplies, equipment and software, and value-added services. A notable offering from PDCO is a private-label brand named Pivotal. It continues to add stock-keeping units to its broader private-label portfolio. The company’s NaVetor is an integrated cloud-based veterinary practice management software for its Animal Health segment.
In June, PDCO launched new integrations for DentalXChange to provide additional electronic insurance processing and electronic patient statement solutions. In May, it announced a new product, Patterson CarePay+, to provide dental offices with software solutions for patient financing, dental insurance plans and payment processing.
Acquisitions & Alliance: We are upbeat about PDCO’s strategy of expanding its business via strategic acquisitions. Last month, Patterson Dental Canada collaborated with Pearl to expand its Second Opinion AI disease detection capabilities’ reach in the Canadian dental market. By integrating Second Opinion within Patterson Dental Canada’s leading software platforms, such as Eaglesoft, Fuse and Dolphin, the partnership aims to elevate the standard of dental care across North America.
During 2023, Patterson Companies completed its acquisition of the Texas-based companies, Veterinary Practitioners and Animal Care Technologies, which provide innovative solutions to veterinary practices through data extraction and conversion, staffing and video-based training services. In 2022, the company announced the acquisition of substantially all the assets of Dairy Tech, Inc., which provides pasteurizing equipment and single-use bags.
Fulfillment Facility Modernization to Optimize Supply: PDCO started strategic modernization of its existing fulfillment facilities and capabilities. It is adding new technologies, such as robots, to automate order picking and enhance the fulfillment pace.
PDCO is also focusing on expanding its fulfillment capacity by opening next-generation centers across several countries that will help build sustainable and more efficient channel capabilities. The company’s strategic investments in fulfillment centers should help alleviate capacity constraints, boost distribution capabilities and enhance growth.
To support its facility modernization and expansion, PDCO has allocated $51.2 million in capital spending during fiscal 2024, up 20.8% from the year-ago period’s level.
Strong Q4 Results: Patterson Companies’ revenues and earnings missed estimates in the fourth quarter of fiscal 2024, reflecting the negative impact of a cybersecurity attack on its claims processing vendor, Change Healthcare. However, Dental consumables showed strong growth, exceeding market expectations. Strong performance in the production animal business drove sales in the Animal Health segment. PDCO has been making significant investments in developing its software and value-added services offerings across both its Dental and Animal Health segments. These are likely to drive demand for its products.
Downsides
Stiff Competition: The U.S. dental products distribution industry is highly competitive and consists chiefly of national, regional and local full-service and mail-order distributors. Patterson Companies needs to continue to introduce newer products in the market to withstand competitive pressure. Failure to do so can dilute its market share.
Integration Risks: PDCO has been on an acquisition spree, which is improving its revenue opportunities but aggravating integration risks. Regular acquisitions are also a distraction for management and likely to impact organic growth. This may limit the company’s future expansion initiatives and worsen its risk profile.
Estimate Trend
The Zacks Consensus Estimate for fiscal 2025 revenues is pegged at $6.73 billion, indicating a 2.5% increase from the previous year’s level. The consensus mark for adjusted earnings per share is pinned at $2.36, implying a 2.6% year-over-year improvement.
Patterson Companies, Inc. Price
Patterson Companies, Inc. price | Patterson Companies, Inc. Quote
Stocks to Consider
Some better-ranked stocks in the broader medical space that have announced quarterly results are Universal Health Services (UHS - Free Report) , Boston Scientific (BSX - Free Report) and The Cooper Companies (COO - Free Report) .
Universal Health Services, sporting a Zacks Rank #1 (Strong Buy) at present, has an estimated long-term growth rate of 19%. You can see the complete list of today’s Zacks #1 Rank stocks here.
UHS’ earnings surpassed estimates in each of the trailing four quarters, the average surprise being 14.58%.
Its shares have rallied 43.3% year to date compared with the industry’s 31.4% growth.
Boston Scientific, carrying a Zacks Rank #2 (Buy) at present, has an estimated long-term growth rate of 12.6%. BSX’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 7.18%.
Boston Scientific’s shares have risen 30.7% year to date compared with the industry’s 4.1% growth.
The Cooper Companies, carrying a Zacks Rank of 2 at present, has an estimated long-term growth rate of 11.3%. COO’s earnings surpassed estimates in three of the trailing four quarters and met the same once, the average surprise being 2.50%.
The Cooper Companies’ shares have lost 1.6% year to date against the industry’s 0.6% growth.