MWI Veterinary Supply, Inc.
) reported second-quarter fiscal 2014 earnings per share (EPS) of
$1.32, up 10.9% year over year. However, it missed the Zacks
Consensus Estimate of $1.36 by 2.9%.
Following the earnings announcement, the company's share price
declined 16% to close at $137.82 on May 7.
Revenues in Detail
Revenues in the second quarter increased 28.1% year over year to
$721.3 million surpassing the Zacks Consensus Estimate of $714
Revenues from the IVESCO business amounted to $120.2 million for
the second quarter that ended on Mar 31, 2014. Of the IVESCO
revenues, approximately 44% were from sales to overlap
After excluding the impact of the IVESCO acquisition (closed on
Nov 1, 2013), revenue growth in the U.S. was 8% on a year-over-year
basis. Despite severe weather conditions experienced during the
second quarter, this year-over-year growth came on the back of
contributions from high single-digit growth in companion animal and
strong single-digit growth in production animal market (excluding
the benefit of the IVESCO acquisition). Further, it also benefited
from the increased sales diagnostic lines which constituted 1.2% of
the growth. MWI Veterinary's Diagnostic revenues increased 15.8% to
$44 million from $38 million in the year-ago quarter.
Internet sales to independent veterinary practices and producers
in the U.S. increased 24.5% during the second quarter. Revenues
from the Diagnostics Unlimited program to all customers went up
approximately 15.6% to $43.7 million. An upside in flea, tick and
heartworm products represented another 0.4% of revenue growth in
the quarter, after being affected by the launch of a new product
sold under an agency relationship. Moreover, revenues from
Veterinary Pharmacy programs (after excluding IVESCO) in the U.S.
grew 17.1% to $59 million.
On the other hand, revenues from the U.K. slipped 0.8% year over
year as a result of organic decrease of 6.8%. However, this decline
was partially offset by a 6% increase related to favorable foreign
currency translation. Excluding the impact of a single large
customer, organic revenue growth in the U.K. was 8% before the
additional benefit of foreign currency translation.
MWI Veterinary's pharmacy fulfillment business grew 17% year
over year (excluding IVESCO) to $59 million. While the total number
of Micro Weigh machine placements was 8 units during the quarter,
placements into dairy customers totaled two units. As of Mar 31,
2014, Micro Weigh machine base was 237 units. (Figures reported are
net of IVESCO).
MWI Veterinary's commissions increased 15.7% year over year to
$5.9 million driven primarily by an incentive earned during the
second quarter as against no such incidence in the year-ago
quarter. Vendor rebates increased $3.9 million from the year-ago
period, due to growth in revenues and timing of manufacturer
Gross profit improved 22% to $91.1 million in the quarter. Cost
of products sold rose 29% to $630.2 million. Moreover, gross margin
contracted 70 basis points (bps) year over year to 12.6% in the
Despite the 26.7% rise in selling, general and administrative
(SG&A) expenses to $60.7 million, MWI Veterinary's adjusted
operating income climbed 13.2% to $27.4 million. The increase in
SG&A expenses was induced primarily by the addition of the
IVESCO business in Nov 2013. However, operating margin contracted
50 bps to 3.8% in the quarter.
MWI Veterinary exited the second quarter with cash balance of
$2,632,000 compared with $953,000 at the end of fiscal 2013.
MWI Veterinary reaffirmed the business outlook for fiscal 2014.
The company envisages revenues of $2.89-$2.94 billion reflecting
annualized growth of 23%−25%. The current Zacks Consensus Estimate
of $2.95 billion approximately falls at the higher end of the
EPS is forecasted in the range of $5.47-$5.67. The EPS outlook
reflects annualized growth of 10.5%−14.5% in fiscal 2014. The
current Zacks Consensus Estimate of $5.63 lies near the higher end
of the company's guidance range.
MWI Veterinary reported a mixed fiscal second quarter with a
revenue beat but bottom-line miss. Earnings lagged the Zacks
Consensus Estimate, although it reflected a solid improvement
compared to the prior-year quarter's earnings. We believe MWI
Veterinary is well positioned to take advantages of certain
tailwinds like the IVESCO acquisition, which is expected to be
accretive to fiscal 2014 earnings and facilitates the company to
serve customers better as a pioneer in full service animal health
distribution. In addition, the company's value-added services and
its plan to implement warehouse management system in the remaining
MWI distribution centers by fiscal 2014 are expected to benefit the
company in the recent future.
Given the lower-than-expected earnings performance, the stock
presently carries a Zacks Rank #4 (Sell). Some better-ranked stocks
in the medical/dental supplies industry include
The Cooper Companies Inc.
). All three stocks 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.
Click to get this free report
COOPER COS (COO): Free Stock Analysis Report
MILESTONE SCI (MLSS): Get Free Report
MWI VET SUPPLY (MWIV): Free Stock Analysis
STERIS CORP (STE): Free Stock Analysis Report
To read this article on Zacks.com click here.