We recently reiterated our Neutral rating on Patterson Companies Inc. (PDCO) with a target price of $33, based on a P/E of 17.0x our fiscal 2011 EPS estimate of $1.94. Results for Patterson’s third quarter fiscal 2010 were mixed.
The company reported third quarter fiscal 2010 earnings per share of 47 cents, in line with the Zacks Consensus Estimate and higher than the year-ago earnings of 45 cents.
Total revenues in the third quarter increased 1% year over year to roughly $820.1 million. Dental Supply revenues declined 2.1% year over year to $572.1 million. The decline was due to the weak economic scenario that resulted in dental practitioners deferring their buying decisions on dental instruments.
Veterinary Supply sales increased 4.5% year over year to $151.8 million. Rehabilitation Supply revenues increased 18.0% year over year to $96.2 million. Growth was primarily due to the acquisitions of Mobilis Healthcare Group in April 2009 and Empi Therapy Solutions in June 2009.
In terms of products, Consumable and printed products sales increased 5.2% year over year to $501.1 million. Equipment and software sales declined 8.1% year over year to $249.3 million. The Other category of revenues registered a growth of 9.7% year over year to $69.6 million.
Patterson witnessed an expansion in margins in the third quarter. Gross margin increased 50 basis points (bps) year over year to 33.7%. Operating margin increased 10 bps year over year to 11.4%.
Patterson Companies, Inc. distributes dental, companion-pet veterinarian and rehabilitation supplies in the U.S. and Canada.
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