(Bloomberg) -- Patterson Companies Inc. short sellers who bet on a deeper rout may be running for cover.
The dental and veterinary supplies distributor's shares jumped as much as 12 percent in early trading after posting a stronger than expected outlook for 2019, despite fourth-quarter results coming up short on the top line. The relief rally, which constitutes the biggest intraday move in almost 10 years, comes just days after short interest reached an eight-month high, according to data compiled by IHS Markit, as bears piled in despite shares trading near the lowest levels since 2009.
Investor sentiment for the St. Paul, Minnesota-based company has been rocky over the last year as concerns that Amazon.com Inc. was moving toward the health-care distribution business grew, and it slashed its profit forecast after third-quarter results. Today's rebound may excite some investors, though analysts warned against chasing the rebound as continued pressures on the company's dental and veterinary segments remain.
“We remain cautious on shares despite historically low valuation levels and would not chase shares today even if they move higher on guidance,” said Robert W. Baird & Co. analyst Jeff Johnson, who rates the shares at the equivalent of a hold. “This guidance could drive a bit of short-covering today, although given the fourth-quarter exit rate, we believe investors might also have a hard time believing this new guidance.”
To contact the reporter on this story: Bailey Lipschultz in New York at blipschultz@bloomberg.net
To contact the editors responsible for this story: Catherine Larkin at clarkin4@bloomberg.net, Brad Olesen, Steven Fromm
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