Patterson Companies (PDCO) PT Lowered to $39 at Evercore ISI
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Evercore ISI analyst Ross Muken lowered estimates and his price target on Patterson Companies (NASDAQ: PDCO) to $39 (from $46) following weak results and outlook.
Muken commented, "PDCO’s steep correction today post challenging results and the surprising SIRO news seems sensible to us, assuming management has a handle on the market slowdown and the transition to multiple technologies vs. CEREC exclusively in CAD / CAM. While over the long-term this is likely the best for PDCO from a strategic positioning perspective the near-term risk to the forecast and drag on EPS is certain to keep shares stuck in neutral. The real difficulty here is that the transition is occurring during a market slowdown for NA dental consumables and a challenging period for animal drug price inflation (with investment also ramping vs. ability to offset headwind via cost cuts). Although some of this headwind is likely temporal, we will probably not get clarity into the outlook for 2018 and beyond until next Q at the earliest. That leaves an uncertainty gap whereby the multiple is probably going to remain constrained. Furthermore with rates moving up, some of the benefit of tax reform is likely to be washed away in valuation (higher WACC – downward pressure on EV / EBITDA). Given these factors / pressures we reiterate our Hold rating and await a better entry point for shares post an improvement in visibility (de-risking of medium-term profit outlook)."
The firm cut FY 2017 EPS from $2.65 to $2.32, FY 2018 EPS from $2.80 to $2.35 and FY 2019 EPS from $3.10 to $2.55.
Shares of Patterson Companies closed at $47.51 yesterday.
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