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On Thursday, Piper Sandler adjusted its outlook on Patterson Companies (NASDAQ:PDCO), reducing the price target to $26.00 from the previous $28.00, while retaining a Neutral rating on the stock.
The revision follows Patterson's release of its first-quarter results, which fell short of expectations with revenues of $1,542 million, marking a 2.8% organic decline, and earnings per share (EPS) at $0.24. This is in contrast to the projected $1,591 million in revenue and $0.33 EPS. Both the Dental and Animal Health sectors reported organic declines, and the adjusted operating margin (OM%) dropped to a record low.
Despite the shortfall and nearly a ten-cent miss from the Street's expectations, the company's management has upheld its EPS guidance for the year at $2.33 to $2.43. This comes amid worsening business conditions in recent months and earnings impacted by the Change Healthcare (NASDAQ:CHNG) cybersecurity incident.
Piper Sandler expressed skepticism about the company's ability to meet even the lower end of the EPS guidance, anticipating an EPS closer to $2.30, given the operational challenges faced over several quarters.
The market's response to the company's performance and outlook was negative, with Patterson Companies' shares dropping 14% on Thursday. The analyst noted that even though the stock's valuation appears low, it is not sufficient to encourage buying at the dip.
The recommendation suggests that before investors, particularly those looking for value, consider engaging with Patterson Companies' stock, the company should demonstrate improved performance over multiple quarters.
In other recent news, Patterson Companies, Inc. reported a decrease in first-quarter fiscal 2025 results, with consolidated sales dropping to $1.54 billion, marking a 2.2% decrease compared to the same period last year. The company faced challenges including a cybersecurity attack on Change Healthcare, impacting the Dental segment, and lower sales in the Companion Animal business.
Despite these setbacks, Patterson reaffirmed their fiscal 2025 earnings guidance, citing cost management actions and strategic investments as measures to bolster financial performance. The Dental segment saw lower sales of dental consumables and equipment due to the cybersecurity attack, while the Animal Health segment reported strong growth in the production animal business.
Patterson anticipates the dental consumables market will stabilize following transient issues like the Change Healthcare attack. The company remains committed to its fiscal 2025 earnings guidance range and is taking actions to improve financial performance.
These are recent developments for the company.
InvestingPro Insights
Patterson Companies (NASDAQ:PDCO) has been grappling with operational headwinds as reflected in their recent quarterly results. In light of these developments, it's worth noting that the company's management has been actively buying back shares, signaling confidence in the company's value proposition. Additionally, Patterson Companies has a history of maintaining dividend payments, having done so for 15 consecutive years, which could be a point of interest for income-focused investors. The stock is also trading at a low revenue valuation multiple, currently at a price-to-earnings (P/E) ratio of 14.04, which is below the adjusted P/E ratio for the last twelve months as of Q1 2025, at 11.77.
Furthermore, the company's dividend yield stood at an attractive 4.63% as of the last recorded date, with the stock trading near its 52-week low. This might present an opportunity for value investors seeking companies with potential for price appreciation and a steady income stream. However, it should be noted that analysts have revised their earnings expectations downwards for the upcoming period, which could indicate potential challenges ahead. For investors looking to delve deeper into the company's financials and future prospects, there are additional InvestingPro Tips available at https://www.investing.com/pro/PDCO.
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