Did you ever believe the kid who said his dog ate his homework? Analysts and investors are having trouble swallowing medical-equipment-maker Patterson's claims that its lower-than-expected quarterly results have to do with a weak economy that is discouraging doctors, veterinarians and the like from buying its healthcare supplies.

Patterson (nasdaq: PDCO - news - people ) reported on Wednesday that its second-quarter profis fell short of Wall Street's expectations. The company earned $53.7 million, or 39 cents per share, up 11.4% from $48.2 million, or 35 cents per share, in the year-ago period. Analysts polled by Thomson Financial predicted profits of 40 cents per share.

Sales for the period ending Oct. 27 climbed to $742.0 million, up 6.9% from $694.3 million in the third quarter of 2006. In spite of the gain, Patterson fell short of the Street's predicted sales of $761 million.

Patterson lowered its fiscal 2008 guidance citing uncertainties in the macroeconomic environment as a catalyst for the expected decline. The company now expects 2008 earnings of $1.68 to $1.72 per share, down from the previously predicted $1.73 to $1.77 per share.

Investors expressed their disappointment by dumping Patterson's shares. The stock plummeted 22.7%, or $8.54, to $29.08, in Wednesday trading.

According to James Wiltz, Patterson's chief executive, the company is suffering setbacks as a result of its clients slowing investment in their practices. "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."

Banc of America Securities analyst Robert Willoughby doesn't buy Wiltz's explanation. His patience with Patterson's management's "inability to hit modest growth targets" is wearing thin. Willoughby called the company's attempt to blame macroeconomic issues for slow sales in the dental business an "excuse," and attributes the company's shortcomings to "an unwillingness to more aggressively manage earnings growth within its cash hoard."

Similarly, Steven Postal of Lehman Brothers noted that while Patterson claims that macroeconomic factors attributed to the company's weakness, its competitors have performed well in spite of the current economic conditions. "While the company is noting macro factors for weakness in its business, we note that the performance of Patterson's equipment business is significantly different than its close peer Henry Schein (nasdaq: HSIC - news - people ), which reported 24.7% dental equipment sales growth in its September quarter." For the same period, Patterson reported a 2.5% sales decline. According to Postal, "this divergence in performance has gone on for more than two years now."

David Veal of Morgan Stanley was less doubtful of Patterson's assertion that the broader economic downturn affected its business. He suspects that the recent "bevy of negative economic news" is causing retrenchment in organic sales growth, with negative implications for Patterson "given its outsized exposure." While Postal compared Patterson's losses with Schein's successes, Veal views macroeconomic conditions as less of a threat to Schein as it remains "underpenetrated and continues to benefit from exclusive distribution agreements." 

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