November 21, 2007 / 4:36 PM / 11 years ago

UPDATE 2-Patterson posts weak Q2, cuts FY08 view; shares fall

(Adds more analyst comments, updates stock movement)

By Esha Dey

BANGALORE, Nov 21 (Reuters) - Dental products maker Patterson Cos Inc (PDCO.O) on Wednesday posted quarterly results below analysts’ estimates and lowered its fiscal 2008 outlook hurt by weakness in its equipment business, sending shares to their year-low.

Patterson, which competes with companies like Henry Schein Inc (HSIC.O) and privately held Benco Dental, posted an 11 percent rise in second-quarter earnings at $53.7 million, or 39 cents a share, missing analysts’ estimates by 1 cent. Revenue for the quarter rose 7 percent to $742 million. Analysts were expecting $758.9 million, according to Reuters Estimates.

Sales of dental equipment and software, which stood at $169 million for the quarter, fell short of forecasted levels, the company said.

“Patterson’s equipment business has been losing share to Henry Schein, its primary competitor, for two-three years now. They are still seeing a lot of pressure in the various components of their equipment business,” Lehman Brothers analyst Steven Postal, who has an “equal weight” rating on the stock, said by phone.

Lisa Gill, an analyst with J.P. Morgan, said dental equipment sales fell $17.4 million short of the brokerage’s estimate for the quarter, and declined 2.5 percent from the year-ago period.

Shares of the company were down about 22 percent at $29.29 in afternoon trade, making them one of the top percentage losers on the Nasdaq. They had touched a new year-low of $28.50 earlier.

“Expectations were that this quarter would show an inflection point of dental equipment actually there is a wide gap between what the market was expecting to see today and what it saw,” Jeff Johnson, an analyst with Robert W. Baird & Co, said by phone.


Patterson caters to the dental, companion-pet veterinarian and rehabilitation supply markets. However, its largest business is Patterson Dental, which provides consumable dental products, equipment, software and services.

“We are cautious about the near-term outlook of our equipment business, since it appears that certain economic and industry conditions may be causing some customers to temporarily delay new capital investments in their practices,” Chief Executive James Wiltz said in a statement.

Looking ahead, the company said it expects earnings of $1.68 to $1.72 a share for fiscal 2008, down from its prior view of $1.73 to $1.77 a share.

For the third quarter, it sees earnings of 44 cents to 46 cents a share. Analysts were expecting earnings of 49 cents a share for the third quarter, and $1.75 a share for 2008.

Morgan Stanley analyst David Veal, who has an “underweight” rating on the stock, said though the recent negative economic conditions have hurt Patterson given its outsized exposure, Schein faces lesser risk as it continues to benefit from exclusive distribution agreements. (Editing by Deepak Kannan)

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