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Why Emergent BioSolutions Inc. Jumped Higher Today

What happened

Emergent BioSolutions (NYSE: EBS) is up 11.4% at 1:00 p.m. EDT after announcing third-quarter earnings following the closing bell yesterday. It was a solid quarter for the biodefense specialist, but the stock is likely jumping because the company raised revenue and income guidance for the year.

So what

Product sales increased 18% as Emergent BioSolutions delivered more of its botulism antitoxin, BAT, to the strategic national stockpile and shipped more RSDL, its skin decontamination and neutralization product, to the Department of Defense. International sales of its immunoglobulin product VIGIV and its auto-injector Trobigard also boosted sales. All those benefits were able to overcome an 11% decline of Emergent's largest product, BioThrax, as the company delivered less of the anthrax vaccine to the strategic national stockpile.

Contract manufacturing was up 29% year over year, but revenue from contracts and grants decreased by 48% as multiple U.S. government contracts were completed and funding for some research and development activities was reduced. When those two smaller revenue sources are added to product sales, overall revenue increased 5% year over year in the third quarter.

Earnings came in at $0.68 per share, 58% higher than the year-ago quarter, as the company slimmed down, spending less on selling, general, and administrative costs.

Image source: Getty Images.

Now what

Management expects 2017 revenue to fall in the $540 million to $560 million range, which is an increase of $40 million at the low end of the range and $30 million at the high end compared to previous guidance. Much of that increase will come from a bump in BioThrax sales, which are expected to fall between $280 million and $290 million. Adjusted net income is expected to fall between $85 million and $95 million, up from previous guidance of $70 million to $80 million.

It doesn't seem like it should be that hard for Emergent BioSolutions' management to accurately estimate demand when the company is sending almost everything it makes to a stockpile, but it makes sense for management to use a fudge factor for potential issues and guide conservatively considering its history.

Investors are benefiting today because Emergent BioSolutions is executing without any hiccups.

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Brian Orelli has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Emergent BioSolutions. The Motley Fool has a disclosure policy.