Raising Target Price On PDCO

Patterson Companies Inc. (PDCO) is sharply higher today after reporting strong fiscal fourth-quarter EPS of $0.77 . . . up 20% from $0.64 last year and much better than the $0.63 we were steeled to see. Revenue growth of 5.0% was much more robust than expectations of a little more than 1%, reflecting strength in dental and animal health equipment, dental consumables excluding infection control and strong results from value-added services. The company attributed this strength as well as its strong margin performance to investments made in recent years that are starting to pay off.

Guidance for the new fiscal year was for EPS of $2.45 to $2.55, again reflecting significant progress from the $2.42 earned in the just completed fiscal year. I am very comfortable with the high end of this range and applying a multiple of 14 yields a new target price of $35.75. PDCO is now a buy below $30.