How did PDCO's Q4 2024 earnings surprise the market?

Patterson Companies (PDCO) experienced a notable decline in its Q4 2024 earnings, which significantly surprised the market. Here are the key details: 1. **Earnings Miss**: The company's GAAP EPS fell to $0.74 per diluted share, which was a decrease from the $0.77 per diluted share reported in the same quarter the previous year. This marked a negative surprise, as analysts had likely anticipated a slight increase or at least maintained the previous quarter's earnings due to the company's historical performance and market conditions. 2. **Revenue Performance**: Despite the earnings miss, the company's revenue remained stable, totaling $1.72 billion, which aligned with the estimated $1.704 billion. This slight increase of 0.1% year-over-year reflected a more resilient sales performance than the earnings indicated. 3. **Sales Impact from Cybersecurity Attack**: The Animal Health Segment, which is a critical part of PDCO's business, faced a significant headwind due to a cybersecurity attack on Change Healthcare. This attack resulted in an 11% year-over-year decline in sales, primarily impacting the segment's performance. Such a substantial drop in a specific segment's sales, coupled with the earnings miss, would have been a notable surprise to the market, which likely had not fully anticipated the severity of this impact. 4. **Market Reaction and Analysts' Views**: The market's reaction to the earnings release was likely one of disappointment, given the earnings miss and the impact of the cybersecurity attack. Analysts' estimates for future quarters, such as Q1 2025, were adjusted downward, reflecting a more cautious outlook on PDCO's earnings potential in the near term. However, the company's long-term growth prospects remained optimistic, with a focus on innovation and strategic initiatives to navigate through the current challenges. In conclusion, PDCO's Q4 2024 earnings fell short of market expectations, primarily due to the cybersecurity attack on Change Healthcare, which adversely affected the Animal Health Segment's sales. Despite stable revenue, the earnings miss and the impact of the attack were significant enough to lead to a negative surprise, prompting analysts to revise their expectations downward for future quarters.