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Avantor (AVTR) Q1 Earnings Surpass Estimates, Margins Down
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Avantor, Inc. (AVTR - Free Report) reported first-quarter 2024 adjusted earnings per share (EPS) of 22 cents, down 24.1% year over year. However, the bottom line surpassed the Zacks Consensus Estimate by 10%.
GAAP EPS for the quarter was 9 cents, down 50% year over year.
Revenue Details
Revenues grossed $1.68 billion in the reported quarter, down 5.6% year over year. However, the metric was in line with the Zacks Consensus Estimate.
Avantor's foreign currency translation reflects a 0.7% favorable impact in the reported quarter, resulting in an organic sales decline of 6.3%.
Segmental Analysis
Effective Jan 1, 2024, Avantor changed its operating model and reporting segment structure from three reportable segments to two reportable segments — Laboratory Solutions and Bioscience Production.
The Laboratory Solutions segment’s net sales were $1.16 billion, reflecting a reported decline of 3.8% year over year. The organic sales fell 4.5% in the reported quarter. Per management, the momentum in consumables and chemicals (both proprietary and third-party) was offset by lower equipment and instrumentation sales in each of its end markets.
Bioscience Production’s net sales were $522.7 million, reflecting a reported decrease of 9.5%, whereas organic sales decreased 10% year over year. Per management, bioprocessing orders were down low-teens on an organic basis versus the company’s expectations of down mid-teens.
In the quarter under review, Avantor’s gross profit declined 8.7% to $570.5 million. The gross margin contracted 113 basis points (bps) to 33.9%.
We had projected 32.2% of gross margin for the first quarter.
Selling, general and administrative expenses increased 7.8% to $424.2 million year over year.
Operating profit totaled $146.3 million, down 36.7% from the prior-year quarter’s level. The operating margin in the quarter also contracted 428 bps to 8.7%.
Financial Position
Avantor exited first-quarter 2024 with cash and cash equivalents of $234.9 million compared with $262.9 million at the end of 2023. Total debt at the end of first-quarter 2024 was $5.32 billion compared with $5.54 billion at 2023-end.
Net cash provided by operating activities at the end of first-quarter 2024 was $141.6 million compared with $219.5 million a year ago.
Guidance
Avantor has reiterated its outlook for 2024.
The company continues to project revenues in the range of $6.85 billion-$7.06 billion (reflecting a reported decline of 1.7% to a reported growth of 1.3% from 2023 levels). The Zacks Consensus Estimate is pegged at $6.95 billion.
Avantor continues to expect its organic revenues to lie within a decline of 2% to growth of 1%.
The company continues to expect its adjusted EPS to lie within 96 cents-$1.04 for the full year. The Zacks Consensus Estimate is pegged at $1.01.
Our Take
Avantor exited the first quarter of 2024 with better-than-expected earnings and in-line revenue estimates. Per management, the bioprocessing end market in Bioscience Production remained healthy with a robust pipeline of new therapies, a favorable regulatory landscape (including three new cell and gene therapy approvals in the quarter) and strong patient demand. The company also saw sequential improvement in its bioprocessing order rate. Within healthcare, medical implant procedure rates continued to be positive and overall demand within the semiconductor end market rebounded from the lows experienced in 2023. These buoy our optimism about the stock.
However, dismal top-line and bottom-line performances in the quarter were disappointing. The decline in segmental revenues was also discouraging. Per management, inventory destocking and cautious customer spending continued to impact demand. These raise our apprehension about the stock. The contraction of both margins also does not bode well.
Zacks Rank and Key Picks
Avantor currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the broader medical space that have announced quarterly results are Align Technology, Inc. (ALGN - Free Report) , ResMed Inc. (RMD - Free Report) and Boston Scientific Corporation (BSX - Free Report) .
Align Technology, carrying a Zacks Rank of 2 (Buy), reported first-quarter 2024 adjusted EPS of $2.14, beating the Zacks Consensus Estimate by 8.1%. Revenues of $997.4 million outpaced the consensus mark by 2.6%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Align Technology has a long-term estimated growth rate of 6.9%. ALGN’s earnings surpassed estimates in three of the trailing four quarters and missed once, the average surprise being 5.9%.
ResMed reported third-quarter of fiscal 2024 adjusted EPS of $2.13, beating the Zacks Consensus Estimate by 10.9%. Revenues of $1.19 billion surpassed the Zacks Consensus Estimate by 1.9%. It currently carries a Zacks Rank #2.
ResMed has a long-term estimated growth rate of 10.9%. RMD’s earnings surpassed estimates in three of the trailing four quarters and missed once, the average surprise being 2.8%.
Boston Scientific reported first-quarter 2024 adjusted EPS of 56 cents, beating the Zacks Consensus Estimate by 9.8%. Revenues of $3.86 billion surpassed the Zacks Consensus Estimate by 4.9%. It currently carries a Zacks Rank #2.
Boston Scientific has a long-term estimated growth rate of 12.5%. BSX’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 7.5%.
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Avantor (AVTR) Q1 Earnings Surpass Estimates, Margins Down
Avantor, Inc. (AVTR - Free Report) reported first-quarter 2024 adjusted earnings per share (EPS) of 22 cents, down 24.1% year over year. However, the bottom line surpassed the Zacks Consensus Estimate by 10%.
GAAP EPS for the quarter was 9 cents, down 50% year over year.
Revenue Details
Revenues grossed $1.68 billion in the reported quarter, down 5.6% year over year. However, the metric was in line with the Zacks Consensus Estimate.
Avantor's foreign currency translation reflects a 0.7% favorable impact in the reported quarter, resulting in an organic sales decline of 6.3%.
Segmental Analysis
Effective Jan 1, 2024, Avantor changed its operating model and reporting segment structure from three reportable segments to two reportable segments — Laboratory Solutions and Bioscience Production.
The Laboratory Solutions segment’s net sales were $1.16 billion, reflecting a reported decline of 3.8% year over year. The organic sales fell 4.5% in the reported quarter. Per management, the momentum in consumables and chemicals (both proprietary and third-party) was offset by lower equipment and instrumentation sales in each of its end markets.
Bioscience Production’s net sales were $522.7 million, reflecting a reported decrease of 9.5%, whereas organic sales decreased 10% year over year. Per management, bioprocessing orders were down low-teens on an organic basis versus the company’s expectations of down mid-teens.
Avantor, Inc. Price, Consensus and EPS Surprise
Avantor, Inc. price-consensus-eps-surprise-chart | Avantor, Inc. Quote
Margin Analysis
In the quarter under review, Avantor’s gross profit declined 8.7% to $570.5 million. The gross margin contracted 113 basis points (bps) to 33.9%.
We had projected 32.2% of gross margin for the first quarter.
Selling, general and administrative expenses increased 7.8% to $424.2 million year over year.
Operating profit totaled $146.3 million, down 36.7% from the prior-year quarter’s level. The operating margin in the quarter also contracted 428 bps to 8.7%.
Financial Position
Avantor exited first-quarter 2024 with cash and cash equivalents of $234.9 million compared with $262.9 million at the end of 2023. Total debt at the end of first-quarter 2024 was $5.32 billion compared with $5.54 billion at 2023-end.
Net cash provided by operating activities at the end of first-quarter 2024 was $141.6 million compared with $219.5 million a year ago.
Guidance
Avantor has reiterated its outlook for 2024.
The company continues to project revenues in the range of $6.85 billion-$7.06 billion (reflecting a reported decline of 1.7% to a reported growth of 1.3% from 2023 levels). The Zacks Consensus Estimate is pegged at $6.95 billion.
Avantor continues to expect its organic revenues to lie within a decline of 2% to growth of 1%.
The company continues to expect its adjusted EPS to lie within 96 cents-$1.04 for the full year. The Zacks Consensus Estimate is pegged at $1.01.
Our Take
Avantor exited the first quarter of 2024 with better-than-expected earnings and in-line revenue estimates. Per management, the bioprocessing end market in Bioscience Production remained healthy with a robust pipeline of new therapies, a favorable regulatory landscape (including three new cell and gene therapy approvals in the quarter) and strong patient demand. The company also saw sequential improvement in its bioprocessing order rate. Within healthcare, medical implant procedure rates continued to be positive and overall demand within the semiconductor end market rebounded from the lows experienced in 2023. These buoy our optimism about the stock.
However, dismal top-line and bottom-line performances in the quarter were disappointing. The decline in segmental revenues was also discouraging. Per management, inventory destocking and cautious customer spending continued to impact demand. These raise our apprehension about the stock. The contraction of both margins also does not bode well.
Zacks Rank and Key Picks
Avantor currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the broader medical space that have announced quarterly results are Align Technology, Inc. (ALGN - Free Report) , ResMed Inc. (RMD - Free Report) and Boston Scientific Corporation (BSX - Free Report) .
Align Technology, carrying a Zacks Rank of 2 (Buy), reported first-quarter 2024 adjusted EPS of $2.14, beating the Zacks Consensus Estimate by 8.1%. Revenues of $997.4 million outpaced the consensus mark by 2.6%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Align Technology has a long-term estimated growth rate of 6.9%. ALGN’s earnings surpassed estimates in three of the trailing four quarters and missed once, the average surprise being 5.9%.
ResMed reported third-quarter of fiscal 2024 adjusted EPS of $2.13, beating the Zacks Consensus Estimate by 10.9%. Revenues of $1.19 billion surpassed the Zacks Consensus Estimate by 1.9%. It currently carries a Zacks Rank #2.
ResMed has a long-term estimated growth rate of 10.9%. RMD’s earnings surpassed estimates in three of the trailing four quarters and missed once, the average surprise being 2.8%.
Boston Scientific reported first-quarter 2024 adjusted EPS of 56 cents, beating the Zacks Consensus Estimate by 9.8%. Revenues of $3.86 billion surpassed the Zacks Consensus Estimate by 4.9%. It currently carries a Zacks Rank #2.
Boston Scientific has a long-term estimated growth rate of 12.5%. BSX’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 7.5%.