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Avantor's Stock Declines Despite Q3 Earnings Beat, Margins Down
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Avantor, Inc. (AVTR - Free Report) reported third-quarter 2024 adjusted earnings per share (EPS) of 26 cents, up by a penny from the year-ago quarter. The bottom line surpassed the Zacks Consensus Estimate by 4%.
GAAP EPS for the quarter was 8 cents, down 50% year over year.
Find the latest EPS estimates and surprises on Zacks Earnings Calendar.
AVTR Revenue Details
Revenues grossed $1.71 billion in the reported quarter, down 0.3% year over year. The metric missed the Zacks Consensus Estimate by 0.6%.
Per management, the decline was due to decreases in the Bioscience Production segment resulting from reduced customer demand.
Avantor's foreign currency translation reflects a 0.4% favorable impact in the reported quarter, resulting in an organic sales decline of 0.7%.
Shares of this company plunged 3.6% at market close.
Avantor’s Segmental Analysis
The Laboratory Solutions segment’s net sales were $1.17 billion, reflecting a reported increase of 1.1% year over year. The organic sales increased 0.6% in the reported quarter. This figure compares to our segmental projection of $1.18 billion.
Per management, the segment’s sales were primarily driven by increased demand in the Education and Advanced Technology end markets.
Bioscience Production’s net sales were $542.9 million, reflecting a reported decrease of 3.2%, whereas organic sales decreased 3.5% year over year. This figure compares to our segmental projection of $538.6 million.
Per management, the sales decline was primarily driven by decreased demand for Avantor's proprietary silicones offerings to customers in the healthcare end market and decreased sales of formulated solutions offerings to customers in the semiconductor industry.
In the quarter under review, Avantor’s gross profit declined 2.5% year over year to $564.4 million. The gross margin contracted 71 basis points (bps) to 32.9%. We had projected 34% of gross margin for the third quarter.
Selling, general and administrative expenses increased 19.4% to $439.8 million year over year.
Operating profit totaled $124.6 million, down 40.7% from the prior-year quarter’s level. The operating margin in the quarter also contracted 495 bps to 7.3%.
Avantor’s Financial Position
Avantor exited third-quarter 2024 with cash and cash equivalents of $285.3 million compared with $272.6 million at the second-quarter end. Total debt at the end of third-quarter 2024 was $4.92 billion compared with $5.12 billion at the second-quarter end.
Cumulative net cash provided by operating activities at the end of third-quarter 2024 was $667.5 million compared with $618.4 million a year ago.
AVTR’s Guidance
Avantor has revised its outlook for 2024.
The company now projects revenues in the range of $6.80 billion-$7.01 billion (reflecting a reported decline of 2.4% to a reported growth of 0.6% from 2023 levels), down from the prior outlook 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 $6.91 billion.
Avantor continues to expect its organic revenues to lie within a decline of 2% to growth of 1%.
The company now expects its adjusted EPS to lie within 95 cents-$1.03 for the full year, down from the prior-outlook of 96 cents-$1.04. The Zacks Consensus Estimate is pegged at $1.01.
Our Take
Avantor exited the third quarter of 2024 with better-than-expected earnings. The strength in the Education and Advanced Technology end markets driving the Laboratory Solutions segment’s net sales during the quarter were impressive. In August, the company had inked a definitive agreement to divest its clinical services business, including kitting, biorepository, and related equipment and ancillaries (collectively "Clinical Services"), to Audax Private Equity. Per management, the divestiture will likely allow AVTR to focus on its lab and production platforms. This buoys our optimism about the stock.
On the earnings call, management confirmed that the company, in its lab segment, had launched several new third-party branded products, including Agilent advanced analytical instruments for advanced battery and sustainable energy applications, Sarstedt life science and blood collection consumables as their first major U.S. distribution partner and Oxford Nanopore's grid ion long-read NGS sequencer, further expanding Avantor’s collaboration with Oxford Nanopore to bring this higher throughput instrument to market in Europe and the Americas. These look promising for the stock.
However, lower-than-expected revenues and the decline in Bioscience Production’s net sales were discouraging. Per management, biopharma and healthcare end markets continue to be pressured by the cautious spending environment. This raises our apprehension about the stock. The contraction of both margins also does not bode well.
Avantor’s Zacks Rank and Stocks to Consider
AVTR currently carries a Zacks Rank #4 (Sell).
Some better-ranked stocks in the broader medical space that have announced quarterly results are Quest Diagnostics Incorporated (DGX - Free Report) , ResMed Inc. (RMD - Free Report) and Boston Scientific Corporation (BSX - Free Report) .
Quest Diagnostics, carrying a Zacks Rank of 2 (Buy), reported third-quarter 2024 adjusted EPS of $2.30, beating the Zacks Consensus Estimate by 1.8%. Revenues of $2.49 billion outpaced the consensus mark by 3.4%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Quest Diagnostics has a long-term estimated growth rate of 6.5%. DGX’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 3.4%.
ResMed reported the first quarter of fiscal 2025 adjusted EPS of $2.20, beating the Zacks Consensus Estimate by 8.4%. Revenues of $1.22 billion surpassed the Zacks Consensus Estimate by 2.9%. It currently carries a Zacks Rank #2.
ResMed has a long-term estimated growth rate of 13.6%. RMD’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 6.4%.
Boston Scientific reported third-quarter 2024 adjusted EPS of 63 cents, beating the Zacks Consensus Estimate by 8.6%. Revenues of $4.21 billion surpassed the Zacks Consensus Estimate by 4.4%. It currently carries a Zacks Rank #2.
Boston Scientific has a long-term estimated growth rate of 12.6%. BSX’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 8.3%.
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Avantor's Stock Declines Despite Q3 Earnings Beat, Margins Down
Avantor, Inc. (AVTR - Free Report) reported third-quarter 2024 adjusted earnings per share (EPS) of 26 cents, up by a penny from the year-ago quarter. The bottom line surpassed the Zacks Consensus Estimate by 4%.
GAAP EPS for the quarter was 8 cents, down 50% year over year.
Find the latest EPS estimates and surprises on Zacks Earnings Calendar.
AVTR Revenue Details
Revenues grossed $1.71 billion in the reported quarter, down 0.3% year over year. The metric missed the Zacks Consensus Estimate by 0.6%.
Per management, the decline was due to decreases in the Bioscience Production segment resulting from reduced customer demand.
Avantor's foreign currency translation reflects a 0.4% favorable impact in the reported quarter, resulting in an organic sales decline of 0.7%.
Shares of this company plunged 3.6% at market close.
Avantor’s Segmental Analysis
The Laboratory Solutions segment’s net sales were $1.17 billion, reflecting a reported increase of 1.1% year over year. The organic sales increased 0.6% in the reported quarter. This figure compares to our segmental projection of $1.18 billion.
Per management, the segment’s sales were primarily driven by increased demand in the Education and Advanced Technology end markets.
Bioscience Production’s net sales were $542.9 million, reflecting a reported decrease of 3.2%, whereas organic sales decreased 3.5% year over year. This figure compares to our segmental projection of $538.6 million.
Per management, the sales decline was primarily driven by decreased demand for Avantor's proprietary silicones offerings to customers in the healthcare end market and decreased sales of formulated solutions offerings to customers in the semiconductor industry.
Avantor, Inc. Price, Consensus and EPS Surprise
Avantor, Inc. price-consensus-eps-surprise-chart | Avantor, Inc. Quote
AVTR’s Margin Analysis
In the quarter under review, Avantor’s gross profit declined 2.5% year over year to $564.4 million. The gross margin contracted 71 basis points (bps) to 32.9%. We had projected 34% of gross margin for the third quarter.
Selling, general and administrative expenses increased 19.4% to $439.8 million year over year.
Operating profit totaled $124.6 million, down 40.7% from the prior-year quarter’s level. The operating margin in the quarter also contracted 495 bps to 7.3%.
Avantor’s Financial Position
Avantor exited third-quarter 2024 with cash and cash equivalents of $285.3 million compared with $272.6 million at the second-quarter end. Total debt at the end of third-quarter 2024 was $4.92 billion compared with $5.12 billion at the second-quarter end.
Cumulative net cash provided by operating activities at the end of third-quarter 2024 was $667.5 million compared with $618.4 million a year ago.
AVTR’s Guidance
Avantor has revised its outlook for 2024.
The company now projects revenues in the range of $6.80 billion-$7.01 billion (reflecting a reported decline of 2.4% to a reported growth of 0.6% from 2023 levels), down from the prior outlook 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 $6.91 billion.
Avantor continues to expect its organic revenues to lie within a decline of 2% to growth of 1%.
The company now expects its adjusted EPS to lie within 95 cents-$1.03 for the full year, down from the prior-outlook of 96 cents-$1.04. The Zacks Consensus Estimate is pegged at $1.01.
Our Take
Avantor exited the third quarter of 2024 with better-than-expected earnings. The strength in the Education and Advanced Technology end markets driving the Laboratory Solutions segment’s net sales during the quarter were impressive. In August, the company had inked a definitive agreement to divest its clinical services business, including kitting, biorepository, and related equipment and ancillaries (collectively "Clinical Services"), to Audax Private Equity. Per management, the divestiture will likely allow AVTR to focus on its lab and production platforms. This buoys our optimism about the stock.
On the earnings call, management confirmed that the company, in its lab segment, had launched several new third-party branded products, including Agilent advanced analytical instruments for advanced battery and sustainable energy applications, Sarstedt life science and blood collection consumables as their first major U.S. distribution partner and Oxford Nanopore's grid ion long-read NGS sequencer, further expanding Avantor’s collaboration with Oxford Nanopore to bring this higher throughput instrument to market in Europe and the Americas. These look promising for the stock.
However, lower-than-expected revenues and the decline in Bioscience Production’s net sales were discouraging. Per management, biopharma and healthcare end markets continue to be pressured by the cautious spending environment. This raises our apprehension about the stock. The contraction of both margins also does not bode well.
Avantor’s Zacks Rank and Stocks to Consider
AVTR currently carries a Zacks Rank #4 (Sell).
Some better-ranked stocks in the broader medical space that have announced quarterly results are Quest Diagnostics Incorporated (DGX - Free Report) , ResMed Inc. (RMD - Free Report) and Boston Scientific Corporation (BSX - Free Report) .
Quest Diagnostics, carrying a Zacks Rank of 2 (Buy), reported third-quarter 2024 adjusted EPS of $2.30, beating the Zacks Consensus Estimate by 1.8%. Revenues of $2.49 billion outpaced the consensus mark by 3.4%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Quest Diagnostics has a long-term estimated growth rate of 6.5%. DGX’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 3.4%.
ResMed reported the first quarter of fiscal 2025 adjusted EPS of $2.20, beating the Zacks Consensus Estimate by 8.4%. Revenues of $1.22 billion surpassed the Zacks Consensus Estimate by 2.9%. It currently carries a Zacks Rank #2.
ResMed has a long-term estimated growth rate of 13.6%. RMD’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 6.4%.
Boston Scientific reported third-quarter 2024 adjusted EPS of 63 cents, beating the Zacks Consensus Estimate by 8.6%. Revenues of $4.21 billion surpassed the Zacks Consensus Estimate by 4.4%. It currently carries a Zacks Rank #2.
Boston Scientific has a long-term estimated growth rate of 12.6%. BSX’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 8.3%.