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VWR Corp (VWR) Beats Earnings & Revenue Estimates in Q2

Zacks Equity Research

VWR Corporation VWR reported second-quarter 2017 adjusted earnings per share (EPS) of 49 cents, reflecting a 16.7% rise from the year-ago figure. Earnings also surpassed the Zacks Consensus Estimate of 44 cents on a strong top-line performance.

Including one-time items, the company reported second-quarter net EPS of 28 cents, flat year over year.

Revenues in the reported quarter were up 2.2% year over year to $1.17 billion. The figure also surpassed the Zacks Consensus Estimate of $1.15 billion. On an organic basis, revenues increased 2.3%.

Revenues in the Americas totaled $726.4 million, up 4.5% year over year (up 2.1% organically) in the quarter under review. The upside in the Americas net sales was driven by strong sales of equipment and instrumentation.

VWR Corporation Price, Consensus and EPS Surprise


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

EMEA-APAC revenues in the quarter grossed $448.9 million, down 1.3% year over year and up 2.7% on an organic basis. Foreign exchange impacted sales by 3.6%, while acquisition less dispositions dented revenues by 0.3% year over year.

VWR reported second-quarter gross margin of 28.1%, flat with the year-ago quarter. Sales, general and administrative expenses rose 4.6% to $249.8 million. The company posted operating income of $80.7 million in the reported quarter, reflecting a 4.6% decline from the year-ago quarter. Operating margin contracted 50 basis points to 6.9% in the second quarter.

VWR exited the second quarter of 2017 with cash and cash equivalents of $112.2 million, down from $141.5 million at the end of the first quarter. As of Jun 30, 2017, year-to-date operating cash flow was $87 million, compared with $119.6 million in the year-ago period.

Merger Update

Post its first-quarter earnings release, VWR had inked a definitive agreement with Avantor, Inc. to get acquired 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 now expected to close in fourth-quarter 2017.

Our Take

VWR’s second-quarter report was quite impressive, with both the top and the bottom line beating the Zacks Consensus Estimate. Geographically, the company recorded growth in the Americas in the reported quarter. However, a drop in EMEA-APAC sales was disappointing. Moreover, foreign currency was a major dampener. VWR’s poor margin scenario also raises concern.

On a brighter note, management is looking forward to benefits from the proposed merger with Avantor. The transaction with Avantor is in the process. The combined entity's suite of products, services and solutions will help the company generate a higher degree of relevance with Biopharma and Industrial customers. Also, the acquisition is expected to generate significant synergies over the next three years. Moreover, it is expected to create a robust product and service portfolio for production-scale biopharma.  Furthermore, this deal will help strengthen VWR’s business in the Asia-Pacific region.

Zacks Rank & Key Picks

VWR currently has a Zacks Rank #3 (Hold). A few better-ranked medical stocks are Mesa Laboratories, Inc. MLAB, INSYS Therapeutics, Inc. INSY and Align Technology, Inc. ALGN. Notably, INSYS Therapeutics and Align Technology sport a Zacks Rank #1 (Strong Buy), while Mesa Laboratories carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

INSYS Therapeutics has a long-term expected earnings growth rate of 20%. The stock has gained around 4.7% over the last three months.

Align Technology has an expected long-term adjusted earnings growth of almost 24.1%. The stock has added roughly 24.7% over the last three months.

Mesa Laboratories has a positive earnings surprise of 2.8% for the last four quarters. The stock has added roughly 19.4% over the last six months.

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