Will Patterson Companies (PDCO) Surprise Earnings in Q2? - Analyst Blog

Patterson Companies, Inc. (PDCO) is slated to announce second-quarter 2015 results on Nov 20. The company posted a positive surprise of 4% in the previous last quarter. However, the company posted an average negative surprise of 0.90% for the last four quarters.

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

Factors at Play

Patterson Companies had a mixed first quarter in which revenues beat the Zacks Consensus Estimate while adjusted earnings fell shy. The Veterinary segment demonstrated quite a strong performance while both dental and medical businesses posted weak financial numbers.

Dental segment's performance was hurt by lower dental equipment and software sales. The medical segment's revenue was also flat on a year-over-year basis, after accounting for the planned divestiture of non-core product lines as part of the restructuring of the division.

The medical segment is expected to improve once the underlying markets stabilize. The company is expected gain from the competitive advantage they have in physical therapy rehab business.

Patterson Companies recent partnership with Abaxis will further strengthen the company's veterinary segment in the near term.

Meanwhile, unfavorable business mix and margin pressure are likely to impede the company's earnings growth in the near term.

Earnings Whispers?
    
Our proven model does not conclusively show that Patterson Companies is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank of #1, 2 or at least 3 for this to happen. That is not the case here as you will see below.

Zacks ESP: The Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is currently pegged at 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at 51 cents.

Zacks Rank: Patterson Companies has a Zacks Rank #3 (Hold) which increases the predictive power of ESP; but when combined with a 0.00% ESP, it 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.

Stocks to Consider

Here are some companies you may like to consider as our model shows they possess the right combination of elements to post an earnings beat this quarter:

• Best Buy Co., Inc. (BBY) with an earnings ESP of 4.17% and a Zacks Rank #1 (Strong Buy)
• The Kroger Co. (KR) with an earnings ESP of 3.28% and a Zacks Rank #2 (Buy)
• Dendreon Corp. (DNDN) with an earnings ESP of 31.25% and a Zacks Rank #2