Market Overview

Patterson Earnings Preview: Continued Revenue Growth Seen

Patterson Companies (NASDAQ: PDCO), whose CEO was just named chairman of the Dental Trade Alliance, is scheduled to report its second-quarter fiscal 2013 results Tuesday, November 20, before the opening bell. Investors will be looking for the company to build on three-straight revenue increases and reverse the past year's decline in net income.

Expectations

Analysts on average predict that Patterson will report that revenue for the quarter rose more than four percent year-over-year to $895.46 million. Per-share earnings are expected to come to $0.49, or up more than 12 percent from same quarter of last year. That consensus earnings estimate was $0.48 per share 60 days ago. But note that Patterson has exceeded analysts' EPS expectations in just one of the past four quarters. The negative surprise in the first quarter was more than eight percent.

Strong sales of dental equipment and software drove results in the first quarter, which also saw weakness in the Patterson Medical unit and an impact from foreign exchange rates. Also, Patterson said it repurchased about 1.1 million common shares during the first quarter under its 25 million-share buyback plan. The share price declined more than five percent following the first-quarter report.

Looking ahead to the current quarter, the analysts' consensus forecast calls for EPS to rise about nine percent year-on-year on sales that are about four percent higher. So far, full-year EPS are expected to be up more than nine percent on a rise of more than four percent in revenues, relative to the previous year.

The Company

Patterson Companies is a medical supplies conglomerate headquartered in St. Paul, Minn. Its operating segments include Dental Supply, Veterinary Supply and Rehabilitation Supply. It is an S&P 500 component and its market capitalization is about $3.7 billion. The company was founded in 1877, and Scott P. Anderson currently is the chief executive and president.

Competitors include DENTSPLY International (NASDAQ: XRAY) and Henry Schein (NASDAQ: HSIC). The former beat EPS estimates by a penny but fell short of revenue estimates in its third quarter. The latter offered a similar third-quarter earnings beat, but revenues were in line with consensus estimates.

During the three months that ended in October, Patterson acquired Iowa Dental Supply and knocked MetroPCS Communications (NYSE: PCS) from the number 459 spot on the S&P 500.

Performance

The long-term EPS growth forecast is more than 10 percent, and the return on equity is more than 14 percent. The price-to-earnings (P/E) ratio is in line with the industry average and the dividend yield is about 1.6 percent. Short interest is almost five percent of the float, though. Of the 14 analysts surveyed by Thomson/First Call who follow the stock, only five recommend buying shares. Their mean price target is about the same as the current share price. A positive surprise or optimistic outlook could prompt raised price targets.

Shares have traded mostly between $33 and $36 since mid June, but they are more than 17 percent higher year to date. The share price is above the 200-day and 50-day moving averages. Over the past six months, the stock has outperformed the competitors mentioned above, as well as the broader markets.

Posted-In: DENTSPLY International henry scheinEarnings Long Ideas News Short Ideas Previews Trading Ideas Best of Benzinga

 

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