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VWR Q3 Earnings Top, Sell-Off to Avantor Approaching Closure

VWR Corporation VWR reported third-quarter 2017 adjusted earnings per share (EPS) of 54 cents, reflecting a 22.7% rise from the year-ago figure. The bottom line also surpassed the Zacks Consensus Estimate of 46 cents by 17.4% on strong top-line performance.

Including one-time items, the company reported third-quarter net EPS of 37 cents, up 19.4% year over year.

Revenues in the reported quarter were up 5.2% year over year to $1.2 billion. The figure also surpassed the Zacks Consensus Estimate of $1.18 billion. On an organic basis, revenues increased 2.2%.

VWR Corporation Price, Consensus and EPS Surprise

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

Revenues in the Americas totaled $717.6 million, up 1.4% year over year (down 0.8% organically) in the quarter under review. The decline in Americas’ organic growth was due to one less billing day in the third quarter. Organic revenue growth further reduced as a result of the adverse weather conditions in Puerto Rico, Texas and Florida.

EMEA-APAC revenues in the quarter grossed $477.6 million, up 11.5% year over year and up 7.4% on an organic basis. Foreign exchange boosted sales by 4.4%, while acquisition less dispositions dented revenues by $0.8 million.

VWR reported third-quarter gross margin of 27.9%, an expansion of 40 basis points year over year. Sales, general and administrative expenses rose 9.2% to $251.5 million. The company posted operating income of $83.1 million, flat year over year. Operating margin contracted 37 basis points to 6.9%.

Merger Update

Post first-quarter earnings release, VWR had inked a definitive agreement with Avantor, Inc. to get acquired by the latter 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 complete in fourth-quarter 2017.

Our Take

VWR’s third-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 and EMEA-APAC during the same period.

On a brighter note, management looks forward to benefits from the proposed merger with Avantor, already in 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 buyout is expected to generate significant synergies over the next three years. In addition, the transaction is likely 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 stocks in the broader medical sector are PetMed Express, Inc. PETS, Luminex Corporation LMNX and Intuitive Surgical, Inc. ISRG. Notably, PetMed and Luminex sport a Zacks Rank #1 (Strong Buy), while Intuitive Surgical carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

PetMed reported earnings per share of 43 cents in the second quarter of fiscal 2018, up 79.2% from the year-ago quarter’s 24 cents. Also, gross margin expanded 548 bps year over year to 35.2% in the reported quarter.

Luminex reported adjusted earnings per share of 19 cents in the third quarter of 2017, up 216.7% year over year. Revenues increased almost 4.1% year over year to $74.1 million.

Intuitive Surgical posted adjusted earnings of $2.77 per share in the third quarter of 2017, up 34.5% year over year. Also, revenues rose 18% year over year to $806.1 million.

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