We recently initiated coverage on Patterson Companies Inc. (PDCO) with a Neutral recommendation. We rate the stock as Neutral with a target price of $30 based on a P/E of roughly 15.5x our fiscal 2011 EPS estimate of $1.94.
Patterson reported second quarter fiscal 2010 earnings per share of 41 cents, in line with the Zacks Consensus Estimate and higher than the year-ago figure by a cent. The company also witnessed growth in its top-line. Total sales in the reported quarter increased 7% year over year to roughly $815 million.
In terms of business segments, Dental Supply revenues were approximately flat year over year at $537.2 million. Veterinary Supply sales increased 30% year over year to $160.7 million. Growth can be attributed to strong demand for the company’s own products and the acquisition of Columbus Serum in October 2008.
Rehabilitation Supply revenues increased 18% year over year to $117.1 million. This was primarily due to Patterson’s internal sales growth and acquisitions.
Patterson expects earnings per share for fiscal 2010 between $1.70 and $1.80. We might reconsider our Neutral recommendation based on the company’s performance in the next quarter.
Patterson depends heavily on acquisitions for growth. The company made a number of acquisitions in the past few years like Mobilis Healthcare Group, Columbus Serum Company, Odyssey Veterinary Software LLC, Denesca, Leventhal & Sons Inc., Associated Medical Supply Inc., Metro Medical Inc. etc.
Headquartered in St. Paul, Minnesota, Patterson is a leading distributor of dental, companion-pet veterinarian, and rehabilitation supply in the United States and Canada.
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