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Why Is Emergent Biosolutions (EBS) Down 23.4% Since Last Earnings Report?

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A month has gone by since the last earnings report for Emergent Biosolutions (EBS - Free Report) . Shares have lost about 23.4% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Emergent Biosolutions due for a breakout? 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 catalysts.

Emergent Earnings & Revenues Miss Estimates in Q1

Emergent BioSolutions’ first-quarter 2019 loss of 13 cents per share significantly came in against the Zacks Consensus Estimate of earnings of 13 cents. Moreover, the loss was wider than the year-ago loss of 3 cents.

Revenues in the reported quarter soared 61.8% from the prior-year period’s $190.6 million, primarily backed by high product sales owing to the company’s recent acquisitions. The top line, however, missed the Zacks Consensus Estimate of $205 million.

Quarter in Detail

Total product sales rose a massive 102% to $153 million from the year-earlier quarter’s tally. This revenue uptick was mainly on the back of contribution from Narcan nasal spray, which was acquired from Adapt Pharma last October and small pox vaccine, ACAM2000, acquired from Sanofi in the fourth quarter of 2017.

BioThrax’s sales plunged 42% year over year in the reported quarter to $11.7 million. Other product sales declined 10.6% to $30.2 million from $33.8 million in the comparable quarter last year. Newly acquired product Narcan (naloxone HCl) nasal spray added $65 million to product sales.

Other product sales include contribution from anthrax monoclonal antibody, raxibacumab which was also acquired in the fourth quarter of 2017 from GlaxoSmithkline.

Contracts, grants and collaboration revenues surged 36% year over year to $21.7 million, primarily owing to greater R&D activities associated with certain development funding programs, most notably, the anthrax vaccine AV7909.

Contract manufacturing revenues decreased 39% to $15.9 million compared with the year-ago tally. This downside was primarily due to the contracted service work that took place in first-quarter 2018 but did not recur in the reported quarter.

The company recorded adjusted EBITDA of $7.4 million in the reported quarter as compared to $3.3 million in 2018, reflecting a jump of 124.2%.

2019 Outlook

Emergent retained its previously issued guidance for earnings and sales. It expects revenues in the range of $1.06-$1.14 billion in 2019. The company anticipates adjusted net income in the band of $150-$180 million and adjusted EBITDA in the bracket of $280-$310 million.

In the second quarter of 2019, the company anticipates total revenues within $200-$220 million.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -75.71% due to these changes.

VGM Scores

At this time, Emergent Biosolutions has a nice Growth Score of B, a grade with the same score on the momentum front. Following the exact same course, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.

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

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of this revision indicates a downward shift. It's no surprise Emergent Biosolutions has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.


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