On Mar 05, 2014, we initiated coverage on
). Covance has managed to post better-than-expected
fourth-quarter results with modest top- and bottom-line beats on
healthy growth across both its segments.
Adjusted EPS of 87 cents were up 18.6% and ahead of the Zacks
Consensus Estimate by 3 cents. Revenues surged 10.8% to $623.1
million, ahead of the Zacks Consensus Estimate of $622
Late-Stage Development continues to grow steadily. Despite
increased spending on strategic IT projects, the segment
witnessed growth on the back of better-than-estimated kit volumes
in central laboratories and the continued strong performance of
Phase II-IV clinical development services.
Over the past few quarters, Covance had been suffering from
sluggish early-stage R&D spending by the biopharmaceutical
industry which resulted in overcapacity in this segment. However,
of late, the company is showing signs of recovery with
improvement in Early Development performance on the back of
robust growth in clinical pharmacology and a substantial increase
in toxicology orders.
Although capital spending environment and competitive
landscape remain as overhangs, we believe Covance is positioned
well to drive growth in the coming quarters. Another reason
behind this optimistic approach might be the expiration of
several patents in the pharmaceutical industry, which are likely
to improve market conditions for Covance, going forward.
The stock currently carries a Zacks Rank #2 (Buy).
Key Picks from the Sector
Medical stocks such as
Natus Medical Inc.
) are also expected to do well. While BABY carries a Zacks Rank
#1 (Strong Buy), ANGO and ABMD hold a Zacks Rank #2.
ABIOMED INC (ABMD): Free Stock Analysis
ANGIODYNAMICS (ANGO): Free Stock Analysis
NATUS MEDICAL (BABY): Free Stock Analysis
COVANCE INC (CVD): Free Stock Analysis Report
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