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Emergent Biosolutions (EBS) Up 14.1% Since Last Earnings Report: Can It Continue?

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It has been about a month since the last earnings report for Emergent Biosolutions (EBS - Free Report) . Shares have added about 14.1% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Emergent Biosolutions due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Emergent Q3 Earnings and Revenues Fall Shy of Estimates

Emergent delivered third-quarter 2018 earnings of 55 cents per share, missing the Zacks Consensus Estimate of 62 cents. Earnings were also lower than the year-ago bottom-line figure of 73 cents.

Revenues in the reported quarter increased 16.3% from the year-earlier period’s level to $173.7 million, primarily backed by high product sales. However, the top line lagged the Zacks Consensus Estimate of $188 million.

Quarter in Detail

Total product sales rose 16.7% to $133.3 million from the year-earlier quarter’s tally.

BioThrax’s sales declined 45% in the reported quarter to $45.9 million sharply owing to the timing of BioThrax deliveries to SNS.

 Other product sales improved to $87.4 million from $30.8 million in the comparable quarter last year.

The increase in other product sales is almost entirely courtesy of the incremental contribution of ACAM2000 and raxibacumab, which did not generate sales in the prior-year period. Notably, raxibacumab and ACAM2000 were acquired by Emergent in the fourth quarter of 2017.

Contracts, grants and collaboration revenues increased 12% year over year to $18.2 million, primarily owing to greater R&D activities associated with certain development funding programs.

Contract manufacturing revenues jumped 17% to $22.2 million compared with the year-ago tally. This upside was primarily on the completion of certain contract manufacturing services at the company’s Camden site.

Research and development (R&D) expenses were $37 million, up 63% from the level in the comparable period a year ago. This upside was caused by higher costs associated with contract development services.

Selling, general and administrative (SG&A) expenses were $42.1 million, up 22% from the level in the comparable quarter last year. This upside was due to higher cost incurred from the acquisition of PaxVax and Adapt Pharma.

2018 Outlook

Emergent raised its previously issued revenue guidance of $715-$755 million to $770-$800 million in 2018. This upped guidance was fueled by a strong organic sales growth performance year to date as well as an expected contribution from the recent buyouts of PaxVax and Adapt Pharma.

However, the company lowered its view of adjusted net income to $105-$115 million from the previous figure of $110-$125 million.

How Have Estimates Been Moving Since Then?

Fresh estimates followed a downward path over the past two months. The consensus estimate has shifted -26.58% due to these changes.

VGM Scores

At this time, Emergent Biosolutions has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with a D. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Emergent Biosolutions has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.




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