Cambrex Corporation ( CBM - Snapshot Report ) has watched its earnings momentum jump since this life sciences company reported strong second quarter results on August 1., Furthermore, the Zacks #1 Rank (Strong Buy) hit its 52-week high of $12.41 on August 14.

With positive earnings surprises in three of the last four quarters, a year-to-date return of 66.9% and an attractive valuation, Cambrex has picked up immense momentum.

Earnings Beat and Improved Outlook

Cambrex came out with impressive second quarter 2012 results, including earnings of 33 cents per share that beat the Zacks Consensus Estimate by 50.0% and the year-ago earnings by 106.3%.

Gross sales climbed 14.3% to $77.1 million. However, excluding the 5.9% unfavorable foreign exchange impact, sales climbed 20.2%. Higher volumes of controlled substances and sales of generic active pharmaceutical ingredients (APIs) benefited sales. Gross margin climbed to 36.9% in the second quarter of 2012 from 28.2% a year-ago. Foreign currency movements favorably impacted gross margin by 1.5%. Moreover, a favorable product mix and increased plant efficiencies contributed to the margin expansion.

The company raised its 2012 guidance for sales growth and adjusted earnings before interest, taxes, depreciation and amortization (EBITDA). The company expects 2012 sales growth of 10% to 13% versus 2011 levels (previous guidance: 2%-6%). The guidance excludes the impact of foreign exchange. Cambrex now projects 2012 EBITDA between $54 million and $58 million as opposed to the previously forecasted range of $47 million to $53 million.

Supply Deal- Another Positive Catalyst

On August 14, Cambrex announced that it signed a supply deal with one of its important customers to supply an API during 2013 and 2014. This will aid the customer in conducting a phase III program for one of its candidates.

The deal is significant for Cambrex as it is expected to boost 2013 revenues by more than $20 million. The deal has the potential to contribute a higher amount to 2014 revenues depending on certain conditions.

Earnings Estimates Moving Higher

Over the last 30 days, the Zacks Consensus Estimate for 2012 jumped 23.5% to 84 cents as both estimates were revised upward. For 2013, the Zacks Consensus Estimate has increased 14.3% to 88 cents over the same time period, aided again by upward revisions from both estimates. The estimate for 2012 represents a year-over-year jump of 81.5%, while the estimate for 2013 marks a year-over-year increase of approximately 6.0%.

Valuation Looks Attractive

Cambrex shares trade at a forward P/E of 14.8x versus the peer group average of 23.6x. On a price-to-book basis, shares currently trade at 3.2x, below the peer group average of 3.6x. Moreover, on a price-to-sales basis, shares are trading at 1.4x versus 2.3x for the peer group average. The stock also looks attractive with respect to return on equity (ROE). It has a trailing 12-month ROE of 20.7%, which is substantially above its peer group average of 9.1%.

Strong Chart

The chart below shows that the stock has been consistently trading above both the 200-day and 50-day moving averages since early May 2012.

Volume is fairly strong, averaging roughly 296K daily. The stock delivered a year to date return of 66.9%, outperforming the S&P 500’s return of 9.9%.

Headquartered in East Rutherford, New Jersey, Cambrex is a life sciences company with a market cap of $365.83 million. The company, founded in 1981, offers products, services and technologies to facilitate the development and commercialization of small molecule therapeutics. The company supplies generic and branded APIs globally for multiple indications. The products and services are supplied to innovator and generic pharmaceutical players.