Avantor, Inc. AVTR reported third-quarter 2022 adjusted earnings per share (EPS) of 34 cents, down by a penny year over year. However, the bottom line, topped the Zacks Consensus Estimate by 3%.
GAAP EPS for the quarter was 25 cents, up by a penny year over year.
Revenues grossed $1.86 billion in the reported quarter, up 1.2% year over year. The metric beat the Zacks Consensus Estimate by 0.7%.
Avantor's COVID-related revenues reflected a 3.3% headwind in the reported quarter, resulting in organic sales growth of 4.5%. Excluding COVID headwinds, Avantor's underlying core organic growth rate was 7.8% during the reported period.
Per management, the year-over-year uptick in the third quarter’s top line was driven by approximately 30% core organic growth in bioproduction and double-digit core organic growth in advanced technologies and applied materials.
Avantor reports financial results in three geographic segments based on customer location — the Americas, Europe and AMEA (Asia, Middle-East and Africa).
The Americas segment’s net sales were $1.12 million, reflecting reported growth of 7.5% year over year. Core organic sales also increased by 8.8% in the reported quarter, driven by continued strength in biopharma, advanced technologies and applied materials.
Europe’s net sales were $595.1 million, reflecting a reported decrease of 11.8%, whereas core organic sales increased 4.8% year over year. Per management, proprietary materials grew in double digits. Bioproduction grew by more than 30% on a core organic basis, driven by demand for Avantor’s processed ingredients, excipients and single-use solutions.
AMEA arm’s net sales were $138.2 million, indicating a reported improvement of 20.6% year over year. Core organic sales increased 15.1% year over year, driven by bioproduction in advanced technology and applied materials, both of which were up by more than 30% on a core organic basis in the quarter.
Avantor, Inc. Price, Consensus and EPS Surprise
Avantor, Inc. price-consensus-eps-surprise-chart | Avantor, Inc. Quote
In the quarter under review, Avantor’s gross profit improved 5.7% to $650.7 million. The gross margin expanded 147 basis points (bps) to 35%.
Selling, general and administrative expenses fell 1% to $374.9 million year over year.
Operating profit totaled $275.8 million, up 16.3% from the prior-year quarter’s level. The operating margin in the quarter also expanded 192 bps to 14.9%.
Avantor exited third-quarter 2022 with cash and cash equivalents of $265.6 million compared with $237.5 million at the end of the second quarter. Total debt at the end of third-quarter 2022 was $6.19 billion compared with $6.54 billion at the end of the second quarter.
Cumulative net cash flow from operating activities at the end of third-quarter 2022 was $638 million compared with $652.6 million a year ago.
Avantor has revised its financial outlook for the full-year 2022.
The company expects to register reported growth of 1.5-2% for the full year. The Zacks Consensus Estimate for the same currently reflects growth of 2.9%.
Avantor now expects to register 2.5-3% organic growth for the full year, lowered from its previous projections of organic revenue growth for the year at 4-6%.
Excluding COVID-19 headwinds, core organic growth is projected to lie within 6-6.5%.
Avantor now expects its adjusted EPS to lie within $1.38-$1.40, lowered from the previous expectation of $1.43-$1.49. This primarily reflects headwinds resulting from foreign exchange translation, recent acquisitions and expected organic impacts in the second half of 2022. The Zacks Consensus Estimate for the same is pegged at $1.42.
The decline in Avantor’s Europe’s reported net sales and continued pandemic-induced headwinds in the third quarter of 2022 are worrying. The company lowered its full-year EPS outlook, which is discouraging. Macroeconomic factors like tighter financial conditions, global supply-chain constraints and the ongoing geopolitical conflict also raised apprehensions about the company’s financial strength.
On the positive side, Avantor exited the third quarter with better-than-expected results. The company registered a robust year-over-year uptick in its top line, along with solid performances across the majority of its segments. Strength in Avantor’s end markets is encouraging. Product launches during the quarter to support nucleic acid, mRNA, and cell and gene therapy workflows, including cell lysis and viral inactivation solutions, and multi-compendial synthetic cholesterol are encouraging. Avantor also confirmed during the earnings call that it plans to launch more Masterflex products in the next few months, which looks promising. The expansion of both margins also bodes well.
Zacks Rank and Stocks to Consider
Avantor currently carries a Zacks Rank #4 (Sell).
Some better-ranked stocks in the broader medical space that have announced quarterly results are Elevance Health Inc. ELV, Medpace Holdings, Inc. MEDP and Merit Medical Systems, Inc. MMSI.
Elevance Health, carrying a Zacks Rank #2 (Buy), reported third-quarter 2022 adjusted EPS of $7.53, which beat the Zacks Consensus Estimate by 6.1%. Revenues of $39.63 billion outpaced the consensus mark by 1.3%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Elevance Health has an estimated long-term growth rate of 12%. ELV’s earnings surpassed estimates in all the trailing four quarters, the average being 4.1%.
Medpace Holdings, sporting a Zacks Rank #1, reported third-quarter 2022 EPS of $2.05, which beat the Zacks Consensus Estimate by 39.5%. Revenues of $383.7 million outpaced the consensus mark by 8.1%.
Medpace Holdings has an estimated growth rate of 44.9% for the full-year 2022. MEDP’s earnings surpassed estimates in all the trailing four quarters, the average being 22%.
Merit Medical, flaunting a Zacks Rank #1, reported third-quarter 2022 adjusted EPS of 64 cents, which beat the Zacks Consensus Estimate by 20.8%. Revenues of $287.2 million outpaced the consensus mark by 5.2%.
Merit Medical has an estimated long-term growth rate of 10.5%. MMSI’s earnings surpassed estimates in all the trailing four quarters, the average being 25.4%.
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