Patterson Companies (PDCO) PT Trimmed at Evercore ISI
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Evercore ISI analyst Ross Muken reiterated a Hold rating and trimmed his price target on Patterson Companies (NASDAQ: PDCO) to $48.00 (from $49.00) following results.
Muken commented, "Given expectations were low heading into PDCO’s print, the company offered generally in-line performance in Dental, confirming some of the fears HSIC stoked, while also offering strong Animal Health core and a more optimistic outlook re a rebound in Dental volumes / patient traffic. The bull will argue that HSIC weakness is more acute and that an odd days phenomenon is contributing to softness, with August likely to show improvement. The bear will argue that this means PDCO is open to a guidance cut later in the year if trends do not rebound materially. From our seat we see the weakness as more temporary given positive macro factors and do not intend to over-extrapolate particularly given the odd demand shift this year between July and August. That being said we struggle more so with the margin guidance, but acknowledge timing and the ERP flow-through are tough to gauge sequentially. Ultimately, we see PDCO as a turnaround in progress with the key elements of stock performance likely derived from an acceleration of core to a solid 3-4% (we model this) and an improvement in OMx (to 6-8% - we model low end in 2018/19). If management is able to deliver this algorithm consistently and TSR improves from the MSD to HSD to LDD, the multiple will expand accordingly and shares will outperform. Unfortunately, we don’t see this becoming apparent for several more Q’s (inflection earliest likely next year) and thus we either await an improved entry point (risk / reward skewed) or time to pass."
The firm bumped FY 2017 EPS estimates from $2.63 to $2.65, FY 2018 EPS estimates were lowered from $2.85 to $2.80 and FY 2019 EPS estimates were maintained a $3.15.
Shares of Patterson Companies closed at $45.74 yesterday.
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