Patterson Companies Falls 5% On Loss of Heartland Dental Distribution Deal

Shares of Patterson Companies fell 4.5% on Wednesday after the medical supplies company disclosed the loss of a distribution deal with Heartland Dental, LLC, a dental service organization.  

In an SEC filing, Patterson (PDCO) disclosed that Heartland Dental selected one of the company’s competitors as its primary distribution partner, effective April 1, 2021. The company stated that the revenue associated with Heartland Dental is immaterial to its operating results and is expected to represent about 1% of the overall fiscal 2021 revenue.

On the 2Q FY21 conference call held in early December, when questioned about the expiry of the Heartland Dental contract at the end of the calendar year, CEO Mark Walchirk stated, “We have a great relationship with Heartland. We consider it a privilege to support Heartland and their practices across the country. And we believe we provide tremendous value to Heartland and their supported practices and we look forward to continuing to build on our relationship with Heartland going forward.” (See PDCO stock analysis on TipRanks)

In response to the news, Piper Sandler analyst Jason Bednar reiterated a Hold rating on Patterson and stated that Henry Schein seems to be the most likely competitor to win the contract. Bednar did not expect the deal to end. That said, he sees the associated profit headwind as manageable.

The rest of the Street has a cautiously optimistic Moderate Buy analyst consensus on the stock based on 3 Buys, 2 Holds and 1 Sell. Shares have surged 47.5% year-to-date and the average price target of $33.33 implies further upside potential of 10.3% over the coming year.

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