Patterson Companies, Inc. PDCO continues to benefit from broad product portfolio, strong prospects in Animal Health unit and prudent acquisitions.
Shares of Patterson Companies gained 16.4% in the past three months, compared with the industry’s growth of 9.1%. Meanwhile, the S&P 500 Index rallied 10.2% in the same time period.
The company, with a market capitalization of $1.9 billion, is one of the leading distributors of dental and animal health products. It anticipates earnings to improve 6.4% over the next five years. Moreover, it has beat estimates in the trailing four quarters by 2.9%, on average.
Additionally, the stock carries a favorable VGM Score of A. Here V stands for Value, G for Growth and M for Momentum with the score being a weighted combination of all three factors. Back-tested results have shown that stocks with a VGM Score of A or B when combined with a top Zacks Rank #1 (Strong Buy) or 2 (Buy) offer best investment opportunities.
Let’s take a closer look at the factors that substantiate the company’s Zacks Rank #2.
What’s Favoring the Stock?
Patterson Companies continues to gain from broad product portfolio. The company’s wide range of products hedges it from any meaningful sales shortfall during an economic downturn.
In fiscal 2019, Patterson Companies launched and integrated new cloud-based veterinary practice management software – NaVetor – for its Animal Health segment. In the fiscal second quarter, the company continued to boost the platform with new features and improvements that included the integration of a tool named Reputation Builder. This tool has been created to help veterinarians manage their online reputation and ratings, and automate the distribution of customer surveys to strengthen relationships and act quickly on feedback to improve their practices.
The company’s growing Animal Health unit is a key catalyst. In the fiscal second-quarter earnings call, management announced that its Animal Health business continues to remain committed toward meeting the product and service needs of customers and driving sales execution. Per the company, Animal Health business remains well poised to drive the top line and thereby margins in fiscal 2020.
Moreover, prudent acquisitions have been helping the company to expand business. In recent past, Patterson Dental Supply, Inc., a business unit of Patterson Companies announced that it acquired Fitzpatrick Dental Design, a dental office design and dental equipment dealer located in Moorpark, CA.
We believe that the company will continue to pursue strategic acquisitions in a bid to expand product portfolio and improve competitive position over the long term.
Which Way Are Estimates Headed?
For fiscal 2020, the Zacks Consensus Estimate for revenues is pegged at $5.62 billion, indicating an improvement of 0.8% from the year-ago period. The same for earnings stands at $1.42 per share, suggesting growth of 1.4% from the year-ago reported figure.
Other Stocks to Consider
Some other top-ranked stocks from the broader medical space are Conmed Corporation CNMD, West Pharmaceutical Services, Inc. WST and DexCom, Inc. DXCM, each currently carrying a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Conmed has an expected long-term earnings growth rate of 17%.
West Pharmaceutical has an estimated long-term earnings growth rate of 14%.
DexCom has a projected earnings growth rate of 260% for the next quarter.
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