On Tuesday, Leerink Partners made an adjustment to the price target for Patterson Companies (NASDAQ:PDCO), reducing it to $28 from $30, while maintaining an Outperform rating on the stock. According to InvestingPro analysis, PDCO is currently trading below its Fair Value, with shares trading at an attractive P/E ratio of 11.76x. The adjustment comes as the firm updates its estimates to account for the current market dynamics, which are described as challenging.
The Leerink analyst projects that Patterson Companies will report total revenue of $1.624 billion and earnings per share (EPS) of $0.46 for the quarter. For context, the company generated total revenue of $6.53 billion in the last twelve months. These figures are slightly below the Visible Alpha consensus, which anticipates revenue of $1.659 billion and EPS of $0.49. The analyst specifically notes a downward revision in expectations for Dental consumables, forecasting a decline of approximately 1.8% compared to the consensus growth estimate of around 1.0%.
Furthermore, Leerink has revised its forecast for the company's fiscal year 2025 EPS from $2.33 to $2.29. This updated estimate falls below Patterson Companies' guidance range of $2.33 to $2.43. Despite this, the analyst suggests that the revision may not significantly deviate from the current buy-side expectations.
The report also touches on the anticipated performance for the second half of the fiscal year, a period during which Patterson Companies traditionally experiences a ramp-up in business. However, the analyst anticipates some modest softness relative to the company's guidance due to market pressures.
Despite the lowered estimates and price target, Leerink believes that the current valuation of Patterson Companies reflects a substantial amount of negative sentiment. The firm argues that the business is likely to remain profitable with solid cash flow generation. The company currently trades at an EV/EBITDA multiple of 7.15x and offers a substantial dividend yield of 4.75%, having maintained dividend payments for 15 consecutive years.
The price target reduction to $28 is attributed to both the lowered estimates and a decrease in the target multiple, from approximately 9 times calendar year 2025 EV/EBITDA to about 8.5 times, based on market conditions. Nonetheless, Leerink reiterates its Outperform rating, citing a positive risk/reward skew for the stock. For a deeper understanding of Patterson Companies' valuation and prospects, InvestingPro subscribers can access the comprehensive Pro Research Report, which includes detailed analysis and additional insights.
In other recent news, Patterson Companies Inc (NASDAQ:PDCO). reported a decrease in first-quarter fiscal 2025 results, with consolidated sales down to $1.54 billion, a 2.2% decrease from the same period last year. Despite challenges like a cybersecurity attack on Change Healthcare (NASDAQ:CHNG) and lower sales in the Companion Animal business, Patterson reaffirmed its fiscal 2025 earnings guidance.
Baird, BofA Securities, and Piper Sandler responded by adjusting their outlooks on Patterson, maintaining a Neutral rating by Baird and Piper Sandler, while BofA Securities continues to recommend the stock as a Buy.
In a significant move, Patterson Companies has signed agreements to acquire Infusion Concepts Ltd in the UK and Mountain Vet Supply in the US, aiming to bolster its animal health business. These acquisitions are expected to be completed during the second fiscal quarter of FY2025.
On the governance front, Patterson Companies' shareholders recently elected a new board and approved key proposals. The proposals included executive compensation and the appointment of Ernst and Young LLP as the company’s independent auditor.
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