PDCO Stock Gains Despite Q2 Earnings Miss and Lower Margins

Patterson Companies, Inc. PDCO delivered adjusted earnings per share (EPS) of 47 cents in the second quarter of fiscal 2025, down 6% year over year. The figure missed the Zacks Consensus Estimate by 4.1%.GAAP EPS for the quarter was 30 cents, reflecting a decline of 28.6% from the year-ago figure.PDCO’s Revenues in DetailPatterson Companies registered revenues of $1.67 billion in the fiscal second quarter, up 1.3% year over year. The figure surpassed the Zacks Consensus Estimate by 2.1%.At constant exchange rate (CER), revenues improved 0.5% year over year.Internal sales (which are adjusted for the effects of currency translation, the net impact of an interest rate swap and contributions from recent acquisitions) increased 0.6% year over year.Shares of this company gained nearly 6.5% in today’s pre-market trading.Find the latest EPS estimates and surprises on Zacks Earnings Calendar.Patterson Companies’ Segment DetailsPatterson Companies’ operations consist of two business segments — Dental and Animal Health.In the quarter under review, the Dental segment reported revenues of $611.7 million, down 2.3% from the year-ago quarter. This compares to the Zacks Consensus Estimate of fiscal second-quarter segmental revenues of $620.5 million.The segment consists of three sub-segments — Consumable, Equipment and Value-added services and other.Internal sales of consumable were $348.9 million in the reported quarter, up 0.7% from the year-ago quarter. This compares to the Zacks Consensus Estimate of fiscal second-quarter revenues of $341.5 million.Internal sales of equipment were $185.2 million in the reported quarter, down 7.5% from the year-ago quarter. This compares to the Zacks Consensus Estimate of fiscal second-quarter revenues of $196.4 million.Internal sales of value-added services were $77.6 million in the reported quarter, down 2.7% from the year-ago quarter. This compares to the Zacks Consensus Estimate of fiscal second-quarter revenues of $82.7 million.Revenues in the Animal Health segment totaled $1.05 billion, up 2.9% year over year on a reported basis and 0.9% at CER. This compares to the Zacks Consensus Estimate of fiscal second-quarter segmental revenues of $1.01 billion.Internal sales increased 1.9% year over year in the reported quarter.The segment consists of three sub-segments — Consumable, Equipment and Value-added services and other.Sales of Consumable were $998.3 million in the reported quarter, up 2.6% on a reported basis and 0.9% at CER from the year-ago quarter. This compares to the Zacks Consensus Estimate of fiscal second-quarter revenues of $957.8 million.Internal sales of consumable were up 1.6% in the reported quarter.Internal sales of Equipment were $30.6 million in the reported quarter, up 1.4% from the year-ago quarter. This compares to the Zacks Consensus Estimate of fiscal second-quarter revenues of $29.2 million.Internal sales of Value-added services were $25.7 million in the reported quarter, up 19.1% on a reported basis and 1.9% at CER from the year-ago quarter. This compares to the Zacks Consensus Estimate of fiscal second-quarter revenues of $24.4 million.Internal sales of Value-added services were up 17.1% in the reported quarter.Patterson Companies, Inc. Price, Consensus and EPS Surprise Patterson Companies, Inc. price-consensus-eps-surprise-chart | Patterson Companies, Inc. QuotePDCO’s Margin AnalysisIn the quarter under review, Patterson Companies’ gross profit decreased 3.2% year over year to $328.1 million. As a percentage of revenues, the gross margin of 19.6% contracted 92 basis points (bps) on a year-over-year basis. We had projected 20.4% of gross margin in the second quarter of fiscal 2025.Operating expenses of $290.5 billion rose 2.9% year over year.Operating profit totaled $37.6 million, reflecting a 33.9% plunge from the year-ago quarter. The operating margin in the fiscal second quarter contracted 120 bps to 2.2%.Patterson Companies’ Financial PositionPDCO exited the second quarter of fiscal 2025 with cash and cash equivalents of $157.9 million compared with $148.1 million at the fiscal first-quarter end. Total debt (including current debt obligations) at the end of second-quarter fiscal 2025 was $450.4 million compared with $451 million at the fiscal first-quarter end.Cumulative net cash used in operating activities at the end of second-quarter fiscal 2025 was $458.7 million compared with $485.3 million a year ago.PDCO’s Fiscal 2025 GuidancePatterson Companies has lowered its adjusted EPS outlook for fiscal 2025.PDCO now projects its full fiscal year adjusted EPS between $2.25 and $2.35, down from the prior outlook of $2.33-$2.43. The Zacks Consensus Estimate is pegged at $2.32.Our TakePatterson Companies exited the second quarter of fiscal 2025 with better-than-expected revenues. Solid top-line results, along with improvements in Dental segment’s internal sales of consumable, were impressive. Robust performances by the Animal Health segment and all three sub-segments were encouraging.Per management, the company took dedicated cost management actions to optimize its operations, made targeted investments in complementary businesses and invested in enhancing its higher-margin products and services during the quarter. This looks promising for the stock.However, PDCO’s lower-than-expected earnings and dismal bottom-line results were disappointing. Lower revenues from the Dental segment and lower Internal sales of equipment and value-added services were discouraging as well. The contraction of both margins does not bode well.Patterson Companies’ Zacks Rank and Stocks to ConsiderPDCO currently carries a Zacks Rank #4 (Sell).Some better-ranked stocks in the broader medical space that have announced quarterly results are Cardinal Health, Inc. CAH, ResMed Inc. RMD and Globus Medical, Inc. GMED.Cardinal Health, carrying a Zacks Rank of 2 (Buy), reported first-quarter fiscal 2025 adjusted EPS of $1.88, beating the Zacks Consensus Estimate by 14.6%. Revenues of $52.28 billion outpaced the consensus mark by 1.9%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.Cardinal Health has a long-term estimated growth rate of 10.2%. CAH’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 11.2%.ResMed reported first-quarter fiscal 2025 adjusted EPS of $2.20, beating the Zacks Consensus Estimate by 8.4%. Revenues of $1.22 billion surpassed the Zacks Consensus Estimate by 2.9%. It currently carries a Zacks Rank #2.ResMed has a long-term estimated growth rate of 14.8%. RMD’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 6.4%.Globus Medical reported third-quarter 2024 adjusted EPS of 83 cents, beating the Zacks Consensus Estimate by 27.7%. Revenues of $625.7 million surpassed the Zacks Consensus Estimate by 3.4%. It currently carries a Zacks Rank #2.Globus Medical has a long-term estimated growth rate of 14.1%. GMED’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 17.7%.5 Stocks Set to DoubleEach was handpicked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2024. While not all picks can be winners, previous recommendations have soared +143.0%, +175.9%, +498.3% and +673.0%.Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.Today, See These 5 Potential Home Runs >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Cardinal Health, Inc. (CAH): Free Stock Analysis Report ResMed Inc. (RMD): Free Stock Analysis Report Patterson Companies, Inc. (PDCO): Free Stock Analysis Report Globus Medical, Inc. (GMED): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks