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VWR Corporation (VWR) Tops Earnings in Q4; View Dull
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VWR Corporation reported fourth-quarter 2016 adjusted earnings per share (EPS) of 45 cents, reflecting a 4.3% decline from the year-ago quarter. Earnings, however, surpassed the Zacks Consensus Estimate of 44 cents. The year-over-year fall in earnings was primarily due to a weak top line with dismal operating margin performance.
Including one-time items, the company reported fourth-quarter net EPS of 20 cents, reflecting a 51.2% plunge year over year.
Revenues in the reported quarter were up 1.6% year over year to $1.13 billion but lagged the Zacks Consensus Estimate of $1.143 billion. Foreign exchange headwinds impacted revenues by 1.6% year over year. On an organic basis, revenues increased 1%, while recent acquisitions boosted revenues by 2.2%.
Revenues in the Americas totaled $668.4 million, up 2.5% year over year (down 1.7% organically) in the fourth quarter. The top-line decline on an organic basis was due to a challenging prior-year comparison and an extra billing day in the fourth quarter of 2015.
EMEA-APAC revenues in the quarter were $461.9 million, up 0.4% year over year (up 3.6% year over year on an organic basis). Foreign exchange headwind impacted sales by 3.8% while acquisition growth was 0.6% year over year.
VWR reported a gross margin of 27.8%, up 13 basis points (bps) year over year on account of a stable pricing environment and favorable product mix. Sales, general and administrative expenses rose 11.8% to $246.2 million. The company posted operating income of $68.1 million in the reported quarter, reflecting a 22.3% decline from the year-ago quarter. Operating margin contracted 186 bps to 6% in the quarter under review.
VWR exited 2016 with cash and cash equivalents of $168.7 million, up from $136.3 million at the end of 2015. Full-year operating cash flow was $266.2 million, compared with $225 million in the year-ago period.
Outlook
VWR has provided its 2017 financial guidance. The company anticipates 2017 revenues in the band of $4.56 billion to $4.61 billion (up 1% to 2% on a reported basis and up 3% to 4% at CER). The Zacks Consensus Estimate of $4.62 billion for 2017 remains above the range. The 2017 earnings guidance band has been kept as $1.79–$1.87 (annualized growth of 6% to 11% at CER). The Zacks Consensus Estimate for the year’s EPS stands at $1.80, close to the lower-end of the company’s guidance range.
Our Take
Despite an earnings beat, VWR posted an unimpressive fourth quarter with revenues significantly missing the Zacks Consensus Estimate. While the primary reason for negative organic revenue growth in Americas was a difficult year-over-year comparison, the company also witnessed a low single-digit decline in biopharma and relatively weaker performance in equipment and instrumentation. The EMEA-APAC segment however, witnessed sluggish growth on strengthening of the U.S. dollar compared to the British pound, the euro, and other currencies that reduced net sales by 3.8% within the segment. The top line guidance for 2017 also looks disappointing, indicating frail chances of recovery ahead.
On the profitability front, a decline in the company’s operating margin adds to our concerns even though its gross margin figure showed slight improvement. Competitive landscape is a major headwind.
Zacks Rank & Key Picks
VWR currently has a Zacks Rank #4 (Sell). Better-ranked medical stocks include Glaukos Corporation (GKOS - Free Report) , Cardiovascular Systems and Neogen Corp. (NEOG - Free Report) . Glaukos sports a Zacks Rank #1 (Strong Buy) while Cardiovascular Systems and Neogen carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Glaukos gained over 100% in the last one year compared with the S&P 500’s gain of 21.5%. The company has a stellar four-quarter average earnings surprise of over 100%.
Cardiovascular Systems surged over 100% in the last one year compared with the S&P 500. It has a four-quarter average earnings surprise of 67.8%.
Neogen gained 31.1% in the past one year, better than the S&P 500 mark. The stock has an impressive long-term earnings growth rate of 16.7% for the next five years compared with the industry average of 15.2%.
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VWR Corporation (VWR) Tops Earnings in Q4; View Dull
VWR Corporation reported fourth-quarter 2016 adjusted earnings per share (EPS) of 45 cents, reflecting a 4.3% decline from the year-ago quarter. Earnings, however, surpassed the Zacks Consensus Estimate of 44 cents. The year-over-year fall in earnings was primarily due to a weak top line with dismal operating margin performance.
Including one-time items, the company reported fourth-quarter net EPS of 20 cents, reflecting a 51.2% plunge year over year.
Revenues in the reported quarter were up 1.6% year over year to $1.13 billion but lagged the Zacks Consensus Estimate of $1.143 billion. Foreign exchange headwinds impacted revenues by 1.6% year over year. On an organic basis, revenues increased 1%, while recent acquisitions boosted revenues by 2.2%.
VWR Corporation Price, Consensus and EPS Surprise
VWR Corporation Price, Consensus and EPS Surprise | VWR Corporation Quote
Revenues in the Americas totaled $668.4 million, up 2.5% year over year (down 1.7% organically) in the fourth quarter. The top-line decline on an organic basis was due to a challenging prior-year comparison and an extra billing day in the fourth quarter of 2015.
EMEA-APAC revenues in the quarter were $461.9 million, up 0.4% year over year (up 3.6% year over year on an organic basis). Foreign exchange headwind impacted sales by 3.8% while acquisition growth was 0.6% year over year.
VWR reported a gross margin of 27.8%, up 13 basis points (bps) year over year on account of a stable pricing environment and favorable product mix. Sales, general and administrative expenses rose 11.8% to $246.2 million. The company posted operating income of $68.1 million in the reported quarter, reflecting a 22.3% decline from the year-ago quarter. Operating margin contracted 186 bps to 6% in the quarter under review.
VWR exited 2016 with cash and cash equivalents of $168.7 million, up from $136.3 million at the end of 2015. Full-year operating cash flow was $266.2 million, compared with $225 million in the year-ago period.
Outlook
VWR has provided its 2017 financial guidance. The company anticipates 2017 revenues in the band of $4.56 billion to $4.61 billion (up 1% to 2% on a reported basis and up 3% to 4% at CER). The Zacks Consensus Estimate of $4.62 billion for 2017 remains above the range. The 2017 earnings guidance band has been kept as $1.79–$1.87 (annualized growth of 6% to 11% at CER). The Zacks Consensus Estimate for the year’s EPS stands at $1.80, close to the lower-end of the company’s guidance range.
Our Take
Despite an earnings beat, VWR posted an unimpressive fourth quarter with revenues significantly missing the Zacks Consensus Estimate. While the primary reason for negative organic revenue growth in Americas was a difficult year-over-year comparison, the company also witnessed a low single-digit decline in biopharma and relatively weaker performance in equipment and instrumentation. The EMEA-APAC segment however, witnessed sluggish growth on strengthening of the U.S. dollar compared to the British pound, the euro, and other currencies that reduced net sales by 3.8% within the segment. The top line guidance for 2017 also looks disappointing, indicating frail chances of recovery ahead.
On the profitability front, a decline in the company’s operating margin adds to our concerns even though its gross margin figure showed slight improvement. Competitive landscape is a major headwind.
Zacks Rank & Key Picks
VWR currently has a Zacks Rank #4 (Sell). Better-ranked medical stocks include Glaukos Corporation (GKOS - Free Report) , Cardiovascular Systems and Neogen Corp. (NEOG - Free Report) . Glaukos sports a Zacks Rank #1 (Strong Buy) while Cardiovascular Systems and Neogen carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Glaukos gained over 100% in the last one year compared with the S&P 500’s gain of 21.5%. The company has a stellar four-quarter average earnings surprise of over 100%.
Cardiovascular Systems surged over 100% in the last one year compared with the S&P 500. It has a four-quarter average earnings surprise of 67.8%.
Neogen gained 31.1% in the past one year, better than the S&P 500 mark. The stock has an impressive long-term earnings growth rate of 16.7% for the next five years compared with the industry average of 15.2%.
The Best Place to Start Your Stock Search
Today, you are invited to download the full list of 220 Zacks Rank #1 "Strong Buy" stocks – absolutely free of charge. Since 1988, Zacks Rank #1 stocks have nearly tripled the market, with average gains of +26% per year. Plus, you can access the list of portfolio-killing Zacks Rank #5 "Strong Sells" and other private research. See these stocks free >>