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HSIC

Henry Schein

$72.18

0.43 (0.60%)

, PDCO

Patterson Companies

$32.92

-0.23 (-0.69%)

11:25
02/13/18
02/13
11:25
02/13/18
11:25

Patterson, Henry Schein sliding after FTC alleges anti-discount conspiracy

Shares of Patterson Companies (PDCO) and Henry Schein (HSIC) are sliding after the Federal Trade Commission said it is suing the dental products distributors for conspiring to refuse to provide discounts. Commenting on the lawsuit, William Blair analyst John Kreger argued that the complaint will likely exacerbate investor concerns about the sustainability of the companies' pricing and margins, an opinion shared by his peer at Leerink. DISCOUNT-EVADING CONSPIRACY: The FTC filed a complaint against the nation's three largest dental supply companies - namely Benco, Henry Schein and Patterson Companies - alleging that they violated U.S. antitrust laws by conspiring to refuse to provide discounts to or otherwise serve buying groups representing dental practitioners. These buying groups sought lower prices for dental supplies and equipment on behalf of solo and small-group dental practices, seeking to gain discounts by aggregating and leveraging the collective purchasing power and bargaining skills of the individual practices. The complaint also alleges an FTC Act Section 5 violation against Benco for inviting a fourth competing distributor to join the conspiracy. The alleged agreement among Benco, Henry Schein and Patterson deprived independent dentists of the benefits of participating in buying groups that purchase dental supplies from national, full-service distributors, the FTC said. PATTERSON, HENRY SCHEIN DENY ALLEGATIONS: Patterson Companies said it "believes that the allegations as described are meritless" and that it intends to defend itself vigorously. The company added that the complaint seeks injunctive relief and does not seek monetary damages. "The company does not anticipate that this matter will have a material adverse effect on our financial condition or results of operations," Patterson added. Meanwhile, Henry Schein has also denied the FTC's anti-trust allegations, saying: "Contrary to the FTC's allegations, the company was a leader in supplying buying groups, has consistently done business with buying groups, has a dedicated team to serve buying groups, and never entered into an agreement with others to refuse to do business with buying groups. [...] The company believes that the allegations as described in the press release are meritless and intends to defend itself vigorously." Henry Schein also said it does not anticipate that this matter will have a material adverse effect on its financial condition or results of operations. SUIT MAY WORSEN CONCERNS: In a research note to investors, William Blair's Kreger pointed out that this is not the first time such anti-competitive allegations have been leveled against Henry Schein, Patterson, and other leading dental distributors. However, the analyst noted that the FTC complaint may add credence to the anti-trust argument, increase the visibility of the risk, and exacerbate investor concerns about the sustainability of the companies' pricing and margins. Kreger also believes this could put further pressure on the valuations of Henry Schein and Patterson in the near-term, particularly until there is some clear evidence of a spending rebound in dental. Meanwhile, Leerink analyst David Larsen told investors that he views the news as being "very serious," and believes it could result in longer-term margin headwinds and multiple compression for Henry Schein. While a trial could take months to resolve and may ultimately end in a settlement or fine, Henry Schein and Patterson should trade down on the news, he contended. PRICE ACTION: In late morning trading, shares of Henry Schein and Patterson have dropped about 10% and 9% to $64.99 and $30.10, respectively.

HSIC

Henry Schein

$72.18

0.43 (0.60%)

PDCO

Patterson Companies

$32.92

-0.23 (-0.69%)

  • 16

    Feb

  • 01

    Mar

HSIC Henry Schein
$72.18

0.43 (0.60%)

02/13/18
WBLR
02/13/18
NO CHANGE
WBLR
William Blair sees FTC suit pressuring Henry Schein, Patterson shares
The Federal Trade Commission yesterday announced it was filing an antitrust suit against Henry Schein (HSIC), Patterson Companies (PDCO), and Benco, the three largest dental distributors in the United States, William Blair analyst John Kreger tells investors in a research note. The analyst says that while this is not the first time anti-competitive allegations have been made against the companies, the FTC complaint will likely "add credence to the antitrust argument, increase the visibility of the risk, and exacerbate investor concerns about the sustainability of pricing and margins." Kreger believes this could put further pressure on the valuations of Henry Schein and Patterson in the near term, particularly until there is some clear evidence of a spending rebound in dental. He has an Outperform rating on Henry Schein and Market Perform rating on Patterson.
02/13/18
LEER
02/13/18
NO CHANGE
LEER
Market Perform
FTC suit could result in longer-term margin headwinds for Henry Schein, says Leerink
Leerink analyst David Larsen notes that the FTC announced a lawsuit against Henry Schein (HSIC), Patterson (PDCO), and Benco for antitrust pricing behavior. The analyst views this news as being "very serious," and could result in longer-term margin headwinds and multiple compression for Henry Schein. He reiterates a Market Perform on Henry Schein's shares.
01/04/18
EVER
01/04/18
INITIATION
Target $81
EVER
Outperform
Henry Schein initiated with an Outperform at Evercore ISI
Evercore ISI started Henry Schein with an Outperform rating and $81 price target.
12/27/17
PIPR
12/27/17
NO CHANGE
Target $78
PIPR
Overweight
Piper sees Henry Schein positioned well against Amazon in Florida
After visiting one of Henry Schein's (HSIC) top five consumable distribution centers, in Jacksonville, Florida, a market where Amazon (AMZN) has recently made investments, Piper Jaffray analyst Sarah James says the company's offerings may stack up well to Amazon. She highlights Henry Schein's ability to distribute 94% of orders next day with a 99% accuracy rate. The analyst believes the company's customer retention could be higher than the market expects driven by partnerships with dentists to manage inventory and maximize revenue generating space. Henry Schein's main defense against Amazon is customer service and the "sticky behavior" of doctors/dentists, James tells investors in a research note titled "Learning from Ground Zero of the War on Amazon and Dental Consumable Trends." She keeps an Overweight rating on Henry Schein with a $78 price target.
PDCO Patterson Companies
$32.92

-0.23 (-0.69%)

01/04/18
EVER
01/04/18
INITIATION
Target $38.5
EVER
In Line
Patterson Companies initiated with an In Line at Evercore ISI
Evercore ISI started Patterson Companies with an In Line rating and $38.50 price target.
12/20/17
NRCS
12/20/17
NO CHANGE
Target $53
NRCS
Buy
Patterson didn't really lose biggest veterinary customer, says Northcoast
Northcoast analyst Ed Snyder notes that competitor sell-side reports have suggested that Patterson Companies lost its biggest veterinary customer, The Veterinary Cooperative, which will now be serviced primarily by MWI Veterinary. However, TVC is a cooperative that negotiates price discounts and does not take inventory, meaning it is not a customer, explains Snyder. Rather than continuing to give TVC an additional price discount, Patterson is choosing to reinvest those dollars in its own loyalty program, said Snyder, who contends that competitor research "misrepresent the facts and therefore overstate the risk." He maintains a Buy rating and $53 price target on Patterson shares.

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