Animal Health acquisition pushes Patterson's Q3 earnings

Last year, Minnesota-based distributor Patterson ($PDCO) made a $1.1 billion bet that boosting its animal health business would turbo-charge its growth. That's how much the company paid for Animal Health International (AHI), which it financed partly by selling off its slow-growing medical-equipment unit to Madison Dearborn Partners for $715 million.

The bet paid off in the company's fiscal third quarter, as strong animal health sales helped Patterson's earnings from continuing operations grow 38% to 68 cents per share, the company announced February 25. That beat the consensus analyst estimate by a penny, according to Zacks Equity Research.

Sales for Patterson Animal health doubled to $749.7 million on a constant-currency basis. Sales were particularly strong in the U.S. companion animal market, according to a press release announcing the results.

Patterson CEO Scott Anderson

"We remain confident in the pace of our integration progress with Animal Health International, Inc., the synergies we are gaining and the competitive position of our market-leading platform," CEO Scott Anderson said in the release.

Patterson, which also distributes dental equipment, recorded total sales for the quarter of $1.4 billion, up 48% year over year on a constant-currency basis.

The company has been on an upswing since it fell short of sales and earnings targets in the first quarter--a miss it attributed to the loss of one big animal health customer and a weak flea-and-tick season in the U.K. The company's stock has risen 16% since January to $45.06

During a conference call with investors after the earnings announcement, Patterson projected that sales growth in the production animal side of its business would be 2% to 3% through 2017 due to softening demand. But during the third quarter, sales on the companion animal side grew 6%, and when asked whether Patterson could continue that momentum, Anderson expressed optimism.

"The driver of the companion business is the U.S.," Anderson said. "And in the U.S., I think they're pretty healthy market dynamics across the board."  

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

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