Patterson Companies Inc. PDCO reported adjusted earnings per share (EPS) of 38 cents in the third quarter of fiscal 2019, in line with the Zacks Consensus Estimate. Earnings however fell 11.6% year over year.

Net sales in the quarter were $1.40 billion, up 1.6% year over year, meeting the Zacks Consensus Estimate.

Patterson Companies has a Zacks Rank #4 (Sell).

Segmental Analysis

The company currently distributes products through subsidiaries Patterson Dental and Patterson Animal Health.

Dental Segment

This segment provides a virtually complete range of consumable dental products, equipment, software, turnkey digital solutions and value-added services to dentists as well as laboratories throughout North America.

In the third quarter, dental sales inched up 0.3% year over year to approximately $579.7 million.

Dental Consumable

Sales in the sub-segment totaled $294.7 million, down 2.5% year over year.

Dental Equipment & Software

Sales in the segment rose 5.1% on a year-over-year basis to $217.6 million.

Other

This segment comprises technical service, parts and labor, software support services as well as office supplies. Sales at the segment declined 1.8% on a year-over-year basis to $67.4 million.

Animal Health Segment

This segment is a leading distributor of veterinary supplies to clinics, public and private institutions and shelters across the United States.

Coming to the third-quarter performance of the platform, sales increased almost 1.6% on a year-over-year basis to $807.5 million.

Corporate

Sales at the segment were $9.5 million, significantly up from the year-ago $2.5 million.

Gross Margin Analysis

Gross profit in the reported quarter was $299.5 million, down 1.6% year over year. As a percentage of revenues, gross margin of 21.4% was flat year over year.

Operating expenses in the reported quarter totaled $254.1 million, up 3.9% on a year-over-year basis.

Guidance

For fiscal 2019, Patterson Companies expects adjusted earnings per share in the range of $1.40 to $1.45. The mid-point of the guidance of $1.42 lies below the Zacks Consensus Estimate of $1.43.

Our Take

Patterson Companies ended the third quarter of fiscal 2019 on a strong note. We are upbeat about the Animal Health segment’s solid performance of late. In fact, the Dental unit saw a year-over-year upside in the quarter as well. The company provides a wide range of consumable supplies, equipment, software and value-added services.

A broad spectrum of products cushions the company against economic downturns in the MedTech space. We believe that a diverse product portfolio, strong veterinary business prospects, accretive acquisitions and strategic partnerships are key catalysts.

On the flip side, a year-over-year decline in earnings per share is discouraging. Declining Dental Consumable revenues is a concern. Management expects headwinds in the technology-based equipment business to persist through fiscal 2019.

Earnings of Other MedTech Majors at a Glance

Some better-ranked MedTech stocks that posted solid quarterly results are Varian Medical Systems VAR, AngioDynamics ANGO and CONMED Corp. CNMD.

Varian reported fiscal first-quarter adjusted EPS of $1.06, in line with the Zacks Consensus Estimate. Revenues of $741 million outpaced the consensus mark of $717.9 million. The stock has a Zacks Rank #2 (Buy).

AngioDynamics’ fiscal second-quarter adjusted EPS of 22 cents exceeded the Zacks Consensus Estimate by a penny. Revenues totaled $91.5 million, which surpassed the consensus estimate by 2.9%. The stock sports a ZacksRank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

CONMED delivered fourth-quarter adjusted EPS of 73 cents, in line with the Zacks Consensus Estimate. Revenues of $242.4 million exceeded the Zacks Consensus Estimate of $229.2 million. The stock carries a Zacks Rank of 2.

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