Please ensure Javascript is enabled for purposes of website accessibility

Why Patterson Companies Stock Dropped 10% This Morning

By Rich Smith – Jun 27, 2019 at 12:53PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

It wasn't just the earnings miss that scared investors -- there was disappointing guidance as well.

What happened

Shares of Patterson Companies (PDCO -2.35%) dropped more than 10% in early trading Thursday, before clawing their way back to a 5.7% loss as of 12:20 p.m. EDT. And if you guessed that the reason for this was an earnings miss -- ding-ding-ding! -- you win the prize.

This morning, the distributor of dental and animal health products announced earnings for its fiscal Q4 2019. Analysts had expected Patterson to report $1.4 billion in sales and profits of $0.39 per share. The company actually hit the sales target, but it earned only $0.30 per share, and $0.37 pro forma -- missing on both counts. 

Red arrow crashing into floor

Image source: Getty Images.

So what

Were these bad results? It depends on how you look at them. On the one hand, yes, Patterson "missed estimates." On the other hand, though, the company scored 4% sales gains in each of its two main divisions (dental and animal health) and grew its profits 30% year over year.

Now what

The problem with Patterson's results wasn't what it earned last quarter (or at least, not entirely), but rather the guidance the company gave for what it will earn next year.

In fiscal 2020, Patterson says it expects earnings to range from $0.99 to $1.09 per share, as calculated according to generally accepted accounting principles (GAAP) -- or $1.33 to $1.43 per share pro forma. Wall Street, however, had been expecting Patterson to earn $1.51 per share. Granted, that may be a pro forma estimate -- but regardless, Patterson appears to be predicting an earnings miss for all of the coming year, on top of the miss from Q4 of last year.

No wonder investors are upset.


Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.