J.P Morgan Comments On Patterson Companies Following Earnings Results

Yesterday morning Patterson Companies PDCO reported 3Q11 results that were consistent with the company's preannouncement on Friday, 2/18. EPS of $0.47 compared to the $0.46-0.47 preannounced range, and the company reiterated FY11 EPS guidance of $1.86-1.88. J.P Morgan remains cautious given the potential ongoing impact of the economy, and as it believes the prospects of an improving economy are already reflected in the current valuation. Veterinary sales were below expectations, while Medical came in above. Vet sales declined 1.3% versus our expectation for 4% growth, with the company citing changes in certain pharmaceutical distribution arrangements. Medical sales grew 22.5%, driven by the DCC acquisition and solid 6% internal growth, and despite some weakness in the UK due to austerity measures. J.P Morgan maintains a Neutral rating on PDCO. Shares trade at 16.3x CY11 EPS estimate of $2.00. Valuation has risen over the past few quarters, which it believe reflects increased optimism around the economic outlook. J.P Morgan remains cautious as it continues to point to the potential ongoing impact of the economy across each of the company's businesses. J.P Morgan has a Neutral rating and $33 PT on PDCO PDCO closed Thursday at $32.64