On Monday, BofA Securities adjusted its outlook on Patterson Companies (NASDAQ:PDCO) shares, reducing the price target from $34.00 to $32.00 while maintaining a Buy rating on the stock.
The decision follows a review of earnings reports from other companies in the dental supply chain, which indicated a softening in dental market trends.
The firm has revised its revenue and EPS estimates for Patterson Companies for the fourth quarter of fiscal year 2024 and the full fiscal year 2025. The updated fourth quarter revenue projection is now $1,703.4 million, down from the previously anticipated $1,719.2 million.
This adjustment reflects a shift from a modest year-over-year growth to a decline. Consequently, the EPS estimate for the same quarter has been modified from $0.84 to $0.82.
For fiscal year 2025, BofA Securities now expects Patterson Companies to generate $6.75 billion in revenue, a decrease from the earlier forecast of $6.80 billion.
This change is primarily attributed to lowered growth expectations for the Dental segment, now estimated at 3.2% compared to the previous 4.4%, and a slight reduction in the Animal Health segment's growth from 3.2% to 2.9%.
The firm also anticipates a decrease in margins due to the impact of reduced volume. As a result, the EPS estimate for fiscal year 2025 has been revised downwards from $2.66 to $2.40.
Despite these adjustments, BofA Securities reaffirms its Buy rating for Patterson Companies, citing potential for margin improvement over time in both the Dental and Animal Health segments and considering the company's valuation to be undemanding. The price objective has been set at $32 based on a consistent 9.5x CY24E EV/EBITDA multiple.
InvestingPro Insights
In light of the recent analysis by BofA Securities, Patterson Companies (NASDAQ:PDCO) shows several noteworthy metrics and InvestingPro Tips that investors may find valuable. With a management that has been actively engaging in share buybacks, the company demonstrates a high shareholder yield, which can be an attractive point for investors seeking companies with shareholder-friendly policies. Additionally, Patterson Companies has maintained dividend payments for 15 consecutive years, underscoring a commitment to returning value to shareholders, reflected in a current dividend yield of 4.04%.
InvestingPro Data indicates a market capitalization of $2.31 billion and a P/E ratio of 12.66, which suggests that the stock is trading at a reasonable valuation compared to its earnings. The company's revenue for the last twelve months as of Q3 2024 stands at $6.57 billion, showing a modest growth of 2.78%. Moreover, despite a forecast of reduced revenue and EPS for the upcoming fiscal periods by analysts, the company has been profitable over the last twelve months.
For investors looking for more comprehensive analysis and additional InvestingPro Tips, they can explore further insights on https://www.investing.com/pro/PDCO. There are 10 more tips available, which could provide a deeper understanding of Patterson Companies' financial health and market position. To access these insights, users can use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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