SAN FRANCISCO (Thomson Financial) - Shares of VCA Antech Inc. rallied
Thursday after analysts responded favorably to the company's
better-than-expected first-quarter results.
The Los Angeles-based animal health care company late Wednesday posted net
income of $31.2 million, or 36 cents a share, above the 34-cent mean estimate of
analysts polled by Thomson Reuters.
Net income in the prior-year quarter was $28.3 million, or 33 cents a share.
Revenue rose to $307.8 million from $265.1 million.
Same-store animal hospital revenue grew 1.9%.
The company affirmed its 2008 outlook of earnings of $1.55 to $1.60 a share
on revenue of $1.3 billion to $1.33 billion.
The mean analyst view is for a per-share profit of $1.57 on revenue of $1.3
billion.
Jeffries & Co. reiterated a buy rating for the stock and a price target of
$38.
"While tough economic conditions continue to impact volumes, we believe
management can sufficiently offset this weakness through continued cost
control," analyst Arthur Henderson wrote in a note to clients Thursday.
The primary risk to the stock is a decline in consumer confidence and
discretionary spending, he said.
Morgan Keenan analyst Robert Mains echoed Henderson's relatively favorable
view of cost controls at the firm but lowered revenue and earnings expectations
on a continued internal growth slowdown.
It was unclear when the company's business would pick up again strongly, he
said.
Mains reiterated an outperform rating for the stock based on its six-month
performance relative to the S&P 500.
"We often say that in healthcare services revenues are more important than
margins: You can always grow the latter, but the former requires market share
gains. One of the appeals of VCA Antech is that this rule doesn't apply to
veterinary services, which are underpenetrated and for which the consumer is
willing to pay (albeit not right now, apparently). This compares favorably to
healthcare services for people that are generally saturated with payors seeking
to reduce spending," he wrote in a note to clients Thursday.
The stock climbed about 8.7% to $30.35 on trading volume higher than the
30-day average.
Brigid Gaffikin
bg/pc
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