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VWR Corporation (VWR) Tops Earnings, Lags Revenue in Q3

BAX GWPH VWR BVX

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VWR Corporation (VWR - Free Report) reported third-quarter 2016 adjusted earnings per share (EPS) of 44 cents, reflecting a 15.7% rise from the year-ago quarter. Earnings also edged past the Zacks Consensus Estimate of 43 cents. Meanwhile, the upside in earnings was driven by strong top-line growth.

Including one-time items, the company reported third-quarter 2016 net EPS of 31 cents, reflecting a 287.5% surge year over year.

Revenues in the reported quarter were up 3.7% year over year at $1.136 billion but below the Zacks Consensus Estimate of $1.151 billion. Foreign exchange headwinds impacted revenues by 0.7% year over year. On an organic basis, revenues increased 1.7%, while recent acquisitions boosted revenues by 2.8%.

VWR CORP Price, Consensus and EPS Surprise

 

VWR CORP Price, Consensus and EPS Surprise | VWR CORP Quote

Revenues in the Americas totaled $707.7 million, up 5.9% year over year (up 1.7% organically) in the third quarter. The top-line increase was supported by mid-single growth in biopharma with growth in large pharma, biotech, medical devices and sales to CRO customers.

EMEA-APAC revenues in the third quarter were $428.4 million, up 0.18% year over year (up 1.4% year over year on an organic basis) led by higher sales to industrial and healthcare customers.

VWR reported a gross margin of 27.5%, up 26 basis points (bps) year over year on account of a stable pricing environment and favorable product mix. Sales, general and administrative expenses rose 5.4% to $230.3 million. The company posted operating income of $83.2 million in the reported quarter, reflecting a 2.6% rise from the year-ago quarter. However, operating margin contracted 8 bps to 7.3% in the quarter under review.

VWR exited the third quarter with cash and cash equivalents of $141.7 million, up from $112.9 million at the end of the second quarter. Year to date, operating cash flow was $186.1 million, compared with $157.3 million in the year-ago period.

Outlook

VWR has made changes in its 2016 revenue guidance. The company anticipates 2016 revenues close to the low end of its earlier provided revenue guidance of $4.54 billion to $4.63 billion. However, it has reaffirmed the 2016 earnings guidance at $1.68–$1.74 (annualized growth of 10% to 14%).

Our Take

VWR posted a mixed quarter with earnings beating the Zacks Consensus Estimate and revenues missing the mark. Segment-wise, management witnessed strong sales growth in both Americas as well as the EMEA-APAC region, accompanied by strong growth in equipment and instrumentation. Along with the third-quarter report, VWR announced the acquisition of Reliable Biopharmaceutical and BioArra which continue to broaden the company’s capabilities to provide value-added services and high quality products to customers. On the profitability front, a slight decline in the company’s operating margin adds to our concerns even though the company’s gross margin figure showed an improvement. Currency fluctuations and the competitive landscape are major headwinds.

Zacks Rank & Key Picks

VWR currently has a Zacks Rank #3 (Hold). Better-ranked medical stocks are GW Pharmaceuticals plc (GWPH - Free Report) , Baxter International Inc. (BAX - Free Report) and Bovie Medical Corporation (BVX - Free Report) . GW Pharmaceuticals and Baxter sport a Zacks Rank #1 (Strong Buy) while Bovie Medical carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

GW Pharmaceuticals surged 65.8% year to date compared to the S&P 500’s 2.0% over the same period. The company has a four-quarter positive average earnings surprise of 41.6%.

Baxter international rallied 25.1% in the past one year, comparing favorably with the S&P 500’s -0.7%. It has a trailing four-quarter average positive earnings surprise of 27%.

Bovie Medical recorded a 151.3% gain in the past one year, way better than the S&P 500’s -0.7%. The company has a trailing four-quarter positive average earnings surprise of 28.7%.

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