|Patterson CEO Scott Anderson|
Shares of Patterson Companies ($PDCO) were down more than 7% to $45.53 on Thursday morning, after the distributor announced disappointing results for its fiscal first quarter. The company reported sales of $1.1 billion and earnings of $46.9 million, or $0.47 a share. Even though earnings were up more than 17% year-over-year, analysts had been expecting EPS of $0.54 on sales of $1.8 billion.
Patterson is just coming off a $1.1 billion acquisition of Animal Health International--a deal that doubled the size of its veterinary unit. The company began a major expansion into animal health in 2013 with the purchase of U.K.-based distributor National Veterinary Services.
The Animal Health International acquisition pushed sales in Patterson's veterinary unit up 48% year-over-year on a constant currency basis to $172 million. But excluding the acquisition, sales barely budged, said CEO Scott Anderson during a conference call with analysts after the earnings release. Anderson blamed the so-so results on a weak flea and tick season in the U.K.
And although Patterson's profit margins increased nearly 21% year-over-year during the quarter, its operating margin within its animal health unit declined. During the conference call, Ann Gugino, chief financial officer, attributed much of the margin fall to bad debt from a single large customer, resulting in a $4 million write-off.
Anderson expressed confidence that animal health would continue to drive growth, as the company makes progress integrating the assets from its latest big acquisition. "We are seeing really good market trends across all segments, and more than anything I would say strong execution in our U.S. companion [animal] business," Anderson said during the call.