Market Overview

Patterson Companies: Something Sizeable This Way Comes


Shares of Patterson Companies, Inc. (NASDAQ: PDCO) plunged more than 23 percent to a new 52-week low of $36.46 as the company didn't announce an expected distribution deal with e-commerce giant, Inc. (NASDAQ: AMZN). Sentiment was also dented by the company’s lower-than-expected quarterly results and weak guidance.

Baird’s Jeff Johnson said ahead of earnings that he's now convinced a distribution agreement with Amazon is increasingly likely. Though the company didn’t announce the deal in its earnings print, the potential deal sounds imminent.

“[I]f PDCO cedes distribution capabilities to AMZN for at least some large customers, PDCO's distribution costs (pick/pack/ship costs) could fall from ~7-8% of revenue to something closer to 5-6% of revenue,” Johnson wrote in a note.

But, the analyst isn't very comfortable with the deal. The deal would cut Patterson’s distribution costs and additional wiggle room to pursue DSO deals, but Johnson said the deal would be a stark admission that the others are good at the company’s core business and would weigh on other firms such as Henry Schein, Inc. (NASDAQ: HSIC).

The potential deal would also highlight the extent of pricing pressure of larger accounts on distributors and a tacit approval by Patterson of Amazon's presence in the space.

“That makes it hard for distributors to threaten/coerce manufacturers not to consider similar partnerships with AMZN over time, a move that over the long run would potentially put all other distributors (including PDCO and HSIC) in a more precarious position,” Johnson highlighted.

Patterson reported second quarter EPS/revenue of $0.56/$1.42 billion.

The company now expects full-year non-GAAP earnings in the range of $2.25 to $2.35 per share, below consensus estimate of $2.64.

Johnson reaffirmed his Neutral rating on the stock as he is concerned that farmers may limit spending on healthcare products given volatile beef and dairy end-market prices. Further, the analyst prefers to be on the sidelines given Patterson’s mixed margin outlook and loss of Sirona exclusivity.

Shares of Patterson plummeted 16 percent to $39.48; The analyst has a price target of $48.

Latest Ratings for PDCO

Aug 2020B of A SecuritiesMaintainsBuy
Jul 2020B of A SecuritiesMaintainsBuy
Jun 2020UBSMaintainsNeutral

View More Analyst Ratings for PDCO
View the Latest Analyst Ratings


Related Articles (PDCO)

View Comments and Join the Discussion!

Posted-In: Analyst Color Earnings News Guidance Price Target Contracts Reiteration Analyst Ratings

Latest Ratings

CAMTStifelInitiates Coverage On19.0
ELMDNorthland Capital MarketsInitiates Coverage On15.0
DKNGUBSInitiates Coverage On52.0
DIODTruist SecuritiesInitiates Coverage On84.0
TGTArgus ResearchUpgrades205.0
View the Latest Analytics Ratings
Don't Miss Any Updates!
News Directly in Your Inbox
Subscribe to:
Benzinga Premarket Activity
Get pre-market outlook, mid-day update and after-market roundup emails in your inbox.
Market in 5 Minutes
Everything you need to know about the market - quick & easy.
Fintech Focus
A daily collection of all things fintech, interesting developments and market updates.
Thank You

Thank you for subscribing! If you have any questions feel free to call us at 1-877-440-ZING or email us at