All posts from Zacks
Zacks in Our Research. Your Success.,

VWR Corp Posts Strong Q1 Results; Gross Margins Weak

On May 10, we issued an updated research report on Radnor, PA-based VWR Corporation VWR which offers laboratory products, services and solutions. The company currently carries a Zacks Rank #3 (Hold).

VWR started off 2016 on a promising note, with its first-quarter results beating the Zacks Consensus Estimate on both the top and the bottom-line fronts. Segment-wise, management witnessed strong sales in both Americas as well as the EMEA-APAC region, accompanied by exceptionally strong growth in equipment and instrumentation.

Per management, robust growth in biotech, medical devices and sales to CRO customers drove the better-than-expected performance of the biopharma business in the Americas during the first quarter. Going ahead, VWR expects to witness continued solid business momentum in the Americas segment in the second quarter as well.

In the EMEA-APAC region, the company witnessed a reduced impact of currency translation on this segment’s sales in the reported quarter, which in turn significantly boosted this segment’s performance. From a product perspective, sales of chemicals grew low-single digits, consumables rose mid-single digits while capital goods increased low-single digits.

The company’s stable cash balance position as well as huge customer base also buoys optimism. Evidently, in 2015, VWR provided solutions to approximately 100,000 customers that include a significant number of Fortune 500 companies, 5000 leading academic institutions and thousands of smaller businesses in multiple industries.

On the flip side, the company’s gross margin figure continues to reflect a bleak scenario. Escalating cost of production has been a major factor behind the lackluster outcome. Moreover, as VWR offers products from a wide range of suppliers, the company’s ability to sustain its gross margins has been, and will continue to be, dependent partly upon its ability to obtain favorable terms from its suppliers.

Unfavorable currency fluctuation continued to impact the company’s overall sales in the first quarter and management expects no respite from the same in the near term. Intensifying competition also continued to pose a threat to the stock.

Key Picks in the Sector

Better-ranked medical stocks are Baxter International Inc. BAX, Boston Scientific Corporation BSX and LeMaitre Vascular, Inc. LMAT. While Baxter sports a Zacks Rank #1 (Strong Buy), Boston Scientific and LeMaitre Vascular carry a Zacks Rank #2 (Buy).

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. blog">Click to get this free report >>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
BOSTON SCIENTIF (BSX): Free Stock Analysis Report
BAXTER INTL (BAX): Free Stock Analysis Report
LEMAITRE VASCLR (LMAT): Free Stock Analysis Report
VWR CORP (VWR): Free Stock Analysis Report
To read this article on click here.
Zacks Investment Research