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Emergent Biosolutions (EBS) Up 12.9% Since Last Earnings Report: Can It Continue?

Zacks Equity Research

It has been about a month since the last earnings report for Emergent Biosolutions (EBS). Shares have added about 12.9% 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 Earnings and Revenues Beat Estimates in Q1

Emergent reported first-quarter 2020 earnings of 1 cent per share, The Zacks Consensus Estimate was of a loss of 2 cents. Moreover, the figure was narrower than the year-ago loss of 10 cents per share.

Revenues in the reported quarter were marginally up 1% from the prior-year period to $192.5 million, primarily backed by an increase in contract development and manufacturing (CDMO) and contracts and grants revenues. The top line also beat the Zacks Consensus Estimate of $190 million.

Quarter in Detail

Total product sales dipped 3% to $148.2 million from the year-earlier quarter. The fall in revenues was due to a decrease in sales of small pox vaccine ACAM2000, which did not record any sales in the reported quarter.

However, Narcan (naloxone HCl) nasal spray added $72.2 million to product sales, increasing 10% year over year. Notably, sales of anthrax vaccines (BioThrax and AV7909) were $51.9 million in the reported quarter, reflecting a significant increase year over year. Other product sales plunged 20% on a year-over-year basis to $24.1 million.

Revenues from contracts and grants increased 4.1% year over year to $22.6 million, primarily owing to higher grant received from the PC2A (diazepam) auto-injector drug-device product candidate.

Contract manufacturing revenues surged 36% to $21.7 million from the year-ago figure. This upside was primarily on solid demand across development services, drug substance and drug product offerings.

The company recorded adjusted EBITDA of $15.3 million in the reported quarter compared with $8.4 million in the year-ago period, up 82.1%.

2020 Guidance

Emergent predicts revenues of $1.18-$1.27 billion for 2020.The company expects adjusted net income within $160-$210 million while adjusted EBITDA is anticipated in the band of $300-$360 million.

In the second quarter of 2020, Emergent expects total revenues within $270-$300 million.

How Have Estimates Been Moving Since Then?

Analysts were quiet during the last two month period as none of them issued any earnings estimate revisions. The consensus estimate has shifted 333.33% due to these changes.

VGM Scores

At this time, Emergent Biosolutions has a strong Growth Score of A, a grade with the same score on the momentum front. However, 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 A. 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 #4 (Sell). We expect a below average return from the stock in the next few months.



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