J.P. Morgan Reiterates Neutral Rating on Animal Health (AHII)

J.P. Morgan is out with a research report this morning, where it reiterates its Neutral rating on Animal Health International Inc. AHII; it did not provide a price target for the stock. The JPM analysts cited the company’s recent earnings report, which was better than expected due to lower SG&A costs and lower interest expense. However, gross margins were weak. The analysts noted that company management noted on the call that there is a tight supply in the beef markets and any improvement in demand could be meaningful to the company. Economics for dairy farmers appear to have stabilized but remain challenging. As for valuation, the JPM analysts remarked, “We maintain our Neutral recommendation. AHII shares trade at 7.2x our CY10 EPS estimate of $0.32, a 50% discount to the rest of our healthcare distribution coverage universe, which we believe factors in low visibility around earnings going forward.”