VWR Corp (VWR) Beats on Q1 Earnings, Awaits Merger Closure
VWR Corporation VWR reported first-quarter 2017 adjusted earnings per share (EPS) of 44 cents, reflecting a 10% rise from the year-ago quarter. Earnings, however, surpassed the Zacks Consensus Estimate of 41 cents. The year-over-year rise in earnings was primarily on account of strong top-line performance.
Including one-time items, the company reported first-quarter net EPS of 29 cents, flat year over year.
Revenues in the reported quarter were up 3.7% year over year to $1.14 billion. The figure also surpassed the Zacks Consensus Estimate of $1.11 billion. On an organic basis, revenues increased 4.3%.
VWR Corporation Price, Consensus and EPS Surprise
VWR Corporation Price, Consensus and EPS Surprise | VWR Corporation Quote
Revenues in the Americas totaled $692.8 million, up 3.9% year over year (up 1.7% organically) in the first quarter. The increase in the Americas net sales was driven by strong sales to industrial, healthcare and education customers.
EMEA-APAC revenues in the quarter were $446.3 million, up 3.4% year over year and 8.4% on an organic basis. Foreign exchange impacted sales by 4.8% while acquisition growth was 0.4% year over year. The disposition of the Australia/New Zealand business reduced revenues by 0.5%.
VWR reported first-quarter gross margin of 28.1%, down 21 basis points (bps) year over year due to a 4.0% rise in cost of goods sold to $819.4 million. Sales, general and administrative expenses rose 3.2% to $238.2 million. The company posted operating income of $81.5 million in the reported quarter, reflecting a 2.3% rise from the year-ago quarter. Operating margin contracted 11 bps to 7.2% in the quarter under review.
VWR exited the first quarter of 2017 with cash and cash equivalents of $141.5 million, down from $168.7 million at the end of fiscal 2016. As of Mar 31, 2016, operating cash flow was $66.5 million, compared with $42 million in the year-ago period.
Merger Update
Post its first-quarter earnings release, VWR inked a definitive agreement with Avantor, Inc. under which the latter will acquire VWR for an enterprise value of $6.4 billion. In view of this, VWR no longer plans to provide or update any financial guidance. The acquisition is expected to be complete by third-quarter 2017.
Our Take
VWR’s first-quarter report was quite impressive, with both the top and the bottom line beating the Zacks Consensus Estimate. Geographically, the company recorded balanced growth in the reported quarter. However, foreign currency was a major dampener in its growth. VWR’s poor margin scenario also raises concern.
On a brighter note, management is looking forward to benefits from the proposed merger with Avantor, including gains from scale and potential geographic expansion to help strengthen VWR’s business across the Americas and Europe.
Zacks Rank & Key Picks
VWR currently has a Zacks Rank #3 (Hold).Better-ranked medical stocks include Hologic, Inc. HOLX, Baxter International Inc. BAX and Progenics Pharmaceuticals, Inc. PGNX. Hologic sports a Zacks Rank 1 (Strong Buy), while Baxter International and Progenics Pharmaceuticals carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Hologic gained 32.9% in the last one year, in comparison to the S&P 500’s 16.4%. The company has a stellar four-quarter average earnings surprise of over 4.16%.
Baxter International rose around 23.9% in the last one year, in comparison to the S&P 500. It has a four-quarter average earnings surprise of 17.14%.
Progenics Pharmaceuticals gained 26.1% in the past one year, better than the S&P 500 mark. It has a four-quarter average earnings surprise of 10.01%.
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