MWI Veterinary Supply Inc.
) reported first-quarter fiscal 2013 EPS of $1.32, up 25.7% on a
year-over-year basis. The result also surpassed the Zacks
Consensus Estimate by 10.9%, representing the fifth successive
quarterly earnings beat for MWI Vet.
Revenues increased 24% year over year to $572.8 million in the
first quarter, which comfortably surpassed the Zacks Consensus
Estimate of $532 million. The takeover of Micro Beef Technologies
(on Oct 31, 2011) led to incremental revenues of $28.7 million in
Organic revenue growth (barring the impact of Micro buyout) in
the U.S. was 16.6% on a year-over-year basis. In the U.S.,
Internet sales to independent veterinary practices and producers
surged 31% year over year, while the veterinary pharmacy program
revenues increased roughly 23% to $52.6 million. The U.K.
witnessed revenue growth of 24.2%, based on organic revenue
growth of 21.7% in the region and favorable foreign exchange
impact of 2.5%.
Commissions increased 16.3% year over year to $4.4 million on the
back of external incentives, partially offset by a decline in
gross billings from agency contracts as one of the manufacturer's
products were unavailable during the quarter.
Gross profit soared 23.1% to $76.9 million in the quarter.
However, gross margin contracted 10 basis points (bps) year over
year to 13.4% as improvement in freight (as a percentage of total
revenue) was more than offset by lower product margin in the
Despite the absolute increase in SG&A expenses due to the
addition of Micro, it declined marginally (10 bps) as a
percentage of sales to 8.3% in the quarter. However, MWI Vet's
operating income climbed 26.4% to $27.1 million. As a result,
operating margin expanded 10 bps to 4.7% in the reported quarter.
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MWI Vet exited the quarter with cash balance of $587,000 compared
with $514,000 at the end of fiscal 2012. The company generated
cash from operations of $15.6 million in the quarter.
As of Dec 31, 2012, the company had $52.6 million on its credit
facilities compared with $48.1 million as of Sep 30, 2012. The
increase was primarily due to the acquisition of PCI Animal
Health in the quarter.
Following a strong first quarter, MWI Vet revised its guidance
for fiscal 2013. The company expects to report revenues of
$2.31-$2.36 billion compared with the prior outlook of
$2.285-$2.335 billion. The updated outlook reflects annualized
growth of 11.3% to 13.7%.
MWI Vet presently envisages EPS in the range of $4.73-$4.87
($4.66-$4.80 earlier) with annualized growth of 11.8%−15.1% for
the ongoing fiscal. The current Zacks Consensus Estimate of $4.80
is at the midpoint of the company's guidance range.
The first-quarter performance of MWI Vet encouraged market
sentiments as share price increased almost 9% (based on adjusted
closing price of $125.9 on Feb 5) following the results. The
bullish momentum of the stock price helped MWI Vet reach a new
52-week high of $129.35 on Feb 4. These positive events reflect
the company's strength to deliver consistent growth amid a
We are optimistic about the recent acquisition of PCI Animal
Health, which should seamlessly strengthen the domestic
distribution network of MWI Vet. Moreover, the buyout is expected
to be accretive to the company's bottom-line for the ongoing
The stock carries a Zacks Rank #2 (Buy). Other medical stocks
), carrying a Zacks Rank #1 (Strong Buy), are also expected to do
well and warrant a look.