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MWI Vet Supply (MWIV): New Analyst Report from Zacks Equity Research - Zacks Equity Research Report

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Summary:

Following last month's announcement of its acquisition by AmerisourceBergen, MWI Veterinary reported a better-than-expected fiscal first quarter beating our estimates on both lines. Moreover, the quarter's performance reflected a solid improvement over the prior-year period's equivalent numbers. Given MWI Vet's leading positions in both the companion and production animal markets worldwide, the combined entity, post completion of the acquisition, is expected to pose a major competitive threat in the fast-growing Animal health market. Notably, MWI Vet has the strength to deliver consistent growth performance amid a low-growth environment. Moreover, its strategy of selective acquisition should keep the momentum going over the long haul. However, vendor dependency and tough competitive landscape are causes of concern. Currency headwinds also remain an overhang. Accordingly, we remain Neutral on the stock.

Overview:

Based in Meridian, ID, MWI Veterinary Supply Inc. is a leading distributor of animal health products to veterinarians across the U.S. and U.K. At the end of fiscal 2014, the company served a vast majority of the veterinary practices and producers located throughout the U.S. and almost one-third of the veterinary practices in U.K. The company distributes products from 23 strategically located distribution centers throughout the U.S. and one in U.K. The product portfolio consists of pharmaceuticals, vaccines, parasiticides, diagnostics, capital equipment, supplies, veterinary pet food and nutritional products. The company markets these products to veterinarians in both the companion animal and production animal markets. As a result of the acquisition of Micro Beef Technologies, the company presently has six additional facilities, which are used for the distribution of products.

MWI Vet offers its customers a variety of value-added services, including online ordering, pharmacy fulfillment, in-clinic inventory management, equipment procurement consultation, educational seminars and pet cremation services. Following the Micro acquisition, roughly 57% of MWI Vet's total revenue in the U.S. are generated from sales of companion animal products and 43% from sales to the production animal market. In U.K, approximately two-thirds of the company's total revenue is generated from sales to the companion animal market and one third from sales to the production animal market.

Industry scenario: The U.S. veterinary supply market is large and fragmented with numerous national, regional and local distributors. The companion animals include dogs, cats, horses and other pets. We believe that this is a large market with an attractive growth profile as increased spending is driven by the rising number of households with pets, enhanced human-animal bonding, aging pet population, focus on animal health and preventative care, advancements in pharmaceuticals and diagnostic testing and extensive marketing programs sponsored by companion animal nutrition and pharmaceutical companies. The production animal market includes cattle, swine and other food-producing animals. This market generally consists of large order sales, which are primarily driven by disease prevention, improved productivity as well as growing focus on food safety.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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