Patterson misses on sales and earnings but reaffirms fiscal 2015 guidance

Investors pushed shares of Patterson Companies ($PDCO) down a few percentage points on Thursday after the company announced fiscal third-quarter results that came in below analysts' estimates. Despite 3.5% sales growth in its veterinary division, Patterson's total sales came in flat year over year at just under $1.1 billion, and net income fell 6% to $54.7 million or 55 cents per share. Analysts had been expecting EPS of 59 cents.

Hopes had been high for Patterson, a Minnesota-based distributor of medical equipment, especially after its second quarter, when sales in its veterinary unit skyrocketed 22% year over year to $376.5 million. That division outpaced Patterson's dental and medical units, the latter of which some analysts are predicting the company will ultimately divest.

Despite the third-quarter miss, Patterson CEO Scott Anderson reaffirmed the company's previous EPS estimate for fiscal 2015 of $2.20 to $2.30 per share.

"As we move toward the end of our fiscal year, we are encouraged by improving market conditions and stable-to-strengthening demand across all of our businesses," Anderson said in a press release. "We have taken, and continue to take, the steps necessary to position Patterson to capitalize on these improving fundamentals by driving efficiencies and enriching our product and service offerings and our geographic reach."

Patterson's veterinary division has grown since 2013, when it acquired National Veterinary Services, the United Kingdom's largest veterinary distributor. During the most recent quarter, the company recorded a slight increase in sales on a constant-currency basis across all of its product categories, including equipment, consumables, and software support services, according to the release.

During a conference call with analysts, Anderson said he's confident that positive trends in pet ownership will continue to benefit Patterson's veterinary unit. The company has been transitioning away from distributing products from IDEXX Laboratories ($IDXX), which switched last year to a direct-sales model. Patterson recently formed a partnership with Abaxis ($ABAX), and Anderson said "we are off to a good start and are pleased with Abaxis placements today."

When asked whether Patterson might consider another acquisition as a way to grow its presence in animal health, Anderson declined to answer the question directly, saying only that the company could "act on many different opportunities" in the industry. "Long-term this is a great space to be in and it will be one [where] we would want to invest capital to grow and draw good returns for our shareholders."

- here's the earnings release
- access a transcript of the earnings call here

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