On Sep 12, we reiterated our long-term Neutral recommendation
on leading distributor of animal health products
MWI Veterinary Supply Inc.
). Despite the consistent strong quarterly results, the company
faces a low growth environment and economic uncertainty in U.S.
and U.K., its major markets.
Why the Reiteration?
On Jul 29, MWI Vet reported its third-quarter fiscal 2013 EPS of
$1.32, beating the Zacks Consensus Estimate by 6.5% and up 14.8%
year over year. Revenues improved 9.3% to $606.4 million in the
quarter. However, the result was almost in line with the Zacks
Consensus Estimate of $607 million.
MWI Vet witnessed healthy double-digit growth in the U.S. helped
by robust contributions from diagnostic lines and benefits from
the PCI Animal Health buyout. The aggressive acquisition strategy
also encourages confidence. The recent decision to buy IVESCO
Holdings seems to be another geostrategic takeover to expand
foothold in the production animal market.
The company continued to focus on improvement of cash flow and
return on invested capital (ROIC) in U.K. However, revenues in
the region remained flat on an organic basis. The macroeconomic
climate in U.S. and U.K. might adversely affect MWI Vet's
performance. Management is also wary that drought conditions in
the U.S. might adversely affect fiscal 2013 results in the
production animal market.
Nonetheless, MWI Vet updated its fiscal 2013 guidance to reflect
strong positive momentum. The company envisages revenues of
$2.33-$2.36 billion (earlier $2.32-$2.36 billion) while EPS is
forecast in the range of $4.89-$4.94 (earlier $4.79-$4.89). The
revised outlook for revenues and EPS reflects annualized growth
of 6.6%−12% and 7.1%−12.1%, respectively in the fourth quarter of
Estimate revision trend also underlines strong growth trend for
MWI Vet. The Zacks Consensus Estimate for fiscal 2013 was revised
1.2% higher to $4.93 over the last 60 days. For fiscal 2014, the
Zacks Consensus Estimate nudged up 0.9% to $5.55 over the same
time period. Given the stellar earnings performance, consistent
positive surprise and estimate revision trend, the stock carries
a Zacks Rank #2 (Buy).
Stocks to Consider
While MWI Vet is an attractive pick, other Zacks Rank #2 (Buy)
stocks such as
Align Technology Inc.
Cardinal Health, Inc.
The Cooper Companies Inc.
) are also worth considering.
ALIGN TECH INC (ALGN): Free Stock Analysis
CARDINAL HEALTH (CAH): Free Stock Analysis
COOPER COS (COO): Free Stock Analysis Report
MWI VET SUPPLY (MWIV): Free Stock Analysis
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