Stocks Tumble for Nation's Largest Vet Lab

October 25, 2009 | By Gabrielle Jonas

© Copyright 2006, The Nasdaq Stock Market Inc

NEW YORK -- Shares of VCA Antech Inc. (NASDAQ: WOOF) dropped more than 10 percent Friday morning after the veterinary laboratory and hospital chain posted disappointing third-quarter earnings Thursday after closing bell.

The markets closed on Friday withVCA Antech stock down 9.04 percent from a previous close of $27.40.

Although the Los Angeles-based company increased earnings from the year-before quarter, it failed to meet consensus estimates. Lack of consumer confidence in the economy had pet-owners holding off on unnecessary procedures, an analyst covering the company told Zootoo Pet News.

VCA Antech owns and operates freestanding veterinary hospitals and exclusively veterinary clinical laboratories, and supplies diagnostic imaging equipment to the veterinary industry.

VCA Antech reported third-quarter earnings of 42 cents per share -- one cent below analyst estimates. Third quarter revenue increased two percent to $338.6 million, well below analyst estimates of $349 million.

"While the earnings were pretty good, the internal growth rate was worst for lab and hospital in eight quarters," Robert Mains an analyst at Morgan Keegan & Co. who downgraded VCA Antech stock from outperform to market perform last January, said.

"Consumer spending and confidence haven't come back yet, and those are the drivers for spending on veterinary services," Mains said. "Customers are still willing to purchase what's required, such as rabies shots, but they're deferring wellness procedures, such as extensive blood panels to pinpoint specific diseases."

The company's chairman and chief executive officer, Bob Antin, blamed the economy as well.

"Current uncertainty in the economy and the lack of visibility regarding the timing and degree of any recovery in our business sector, makes it particularly difficult to predict consumer demand for our services," Bob Antin, chairman and chief executive officer said.

The company consequently lowered its fiscal year earnings per share projections to $1.52 to $1.56, versus the consensus of $1.58 consensus.

"VCA Antech's growth rate is very tightly correlated to the consumer confidence index," Mains said. "The company will pick up with the consumer confidence picks up."

The first week in November promises to be interesting for investors in the pet sector.

Animal Health International, Inc. (Nasdaq:AHII) -- which sells about 35,000 products -- will release quarterly results Nov. 3, shortly after market open. The next day, veterinary supply powerhouse, Henry Schein, will report its third-quarter earnings.