Avantor, Inc. AVTR reported fourth-quarter 2023 adjusted earnings per share (EPS) of 25 cents, down 21.9% year over year. The bottom line surpassed the Zacks Consensus Estimate by 13.6%.
GAAP EPS for the quarter was 15 cents, down 28.6% year over year.
Full-year adjusted EPS was $1.06, up 24.8% compared with that at the end of the comparable 2022 period. The figure surpassed the Zacks Consensus Estimate by 1.9%.
Revenue Details
Revenues grossed $1.72 billion in the reported quarter, down 4% year over year. However, the metric topped the Zacks Consensus Estimate by 1.7%.
Avantor's foreign currency translation reflects a 1.9% favorable impact in the reported quarter, resulting in an organic sales decline of 5.9% and a core organic sales (excluding COVID-19 headwinds) decline of 4.8% during the reported period.
Full-year revenues were $6.97 billion, reflecting a 7.3% decline from the comparable 2022 period. The figure, however, topped the Zacks Consensus Estimate by 0.4%.
Segmental Analysis
Avantor reports financial results in three geographic segments based on customer location — the Americas, Europe and AMEA (Asia, the Middle-East and Africa).
The Americas segment’s net sales were $994.8 million, reflecting a reported decline of 5.1% year over year. Core organic sales fell 3.8% in the reported quarter as the region continued to experience pressure from destocking and lower demand in biopharma, healthcare and advanced technologies and applied materials end markets. This compares to our projection of fourth-quarter segmental revenues of $933.4 million.
Europe’s net sales were $603.5 million, reflecting a reported decrease of 2.2%, whereas core organic sales decreased 6.8% year over year. Per management, the decline in core organic sales was due to the region’s weakness in the biopharma and healthcare end markets with softer demand for lab consumables and single-use solutions resulting from ongoing destocking. This compares to our projection of fourth-quarter segmental revenues of $632.3 million.
AMEA arm’s net sales were $124.5 million, indicating a reported decline of 4.1% year over year. The core organic sales decreased 3.5% year over year due to declines in lab consumables and formulated solutions for Avantor’s semiconductor customers. This compares to our projection of fourth-quarter segmental revenues of $120.5 million.
Avantor, Inc. Price, Consensus and EPS Surprise
Avantor, Inc. Price, Consensus and EPS Surprise
Avantor, Inc. price-consensus-eps-surprise-chart | Avantor, Inc. Quote
Margin Analysis
In the quarter under review, Avantor’s gross profit declined 7.2% to $570.4 million. The gross margin contracted 113 basis points (bps) to 33.1%.
We had projected 31.8% of gross margin for the fourth quarter.
Selling, general and administrative expenses increased 6.7% to $387.1 million year over year.
Operating profit totaled $183.3 million, down 27.2% from the prior-year quarter’s level. The operating margin in the quarter also contracted 339 bps to 10.6%.
Financial Position
Avantor exited 2023 with cash and cash equivalents of $262.9 million compared with $372.9 million at the end of 2022. Total debt at the end of 2023 was $5.54 billion compared with $6.29 billion at 2022-end.
Cumulative net cash provided by operating activities at the end of 2023 was $870 million compared with $843.6 million a year ago.
Guidance
Avantor has initiated its outlook for 2024.
The company projects revenues in the range of $6.85 billion-$7.06 billion (reflecting a reported decline of 1.7% to a reported growth of 1.3% from 2023 levels). The Zacks Consensus Estimate is pegged at $6.96 billion.
Avantor expects its organic revenues to lie within decline of 2% to growth of 1%.
The company expects its adjusted EPS to lie within 96 cents-$1.04 for the full year. The Zacks Consensus Estimate is pegged at $1.04, which matches the upper limit of the company’s outlook.
Our Take
Avantor exited the fourth quarter of 2023 with dismal top-line and bottom-line performances, which were disappointing. The decline in segmental revenues was also discouraging.
Per management, inventory destocking and cautious customer spending continued to impact demand. The continued destocking and conservative approach to customer spending in the research environment also negatively impacted Avantor’s results. Its results were also adversely affected by pressure on both consumables and equipment and instrumentation sales during the reported quarter. These raise our apprehension about the stock. The contraction of both margins also does not bode well.
On a positive note, Avantor’s better-than-expected results were impressive. The continued strong growth in sales to its higher education customers and the biomaterials platform was encouraging.
On the fourth-quarter earnings call, management confirmed that Avantor renewed multiyear agreements with two significant semiconductor customers. It also launched innovative new products, including its J.T.Baker Viral Inactivation Solution, to address a critical regulatory need in bioprocessing and next-generation coatings and custom resins for 3D printing as part of its NuSil high-purity silicone platform. Per management, Avantor continued to realize the impact of investments in its digital capabilities. Continued focus on cell and gene therapy has been yielding double-digit growth in several critical product lines targeting these workflows. These look promising for the stock.
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 Cencora, Inc. COR, Elevance Health, Inc. ELV and Cardinal Health, Inc. CAH.
Cencora, carrying a Zacks Rank of 2 (Buy), reported first-quarter fiscal 2024 adjusted EPS of $3.28, beating the Zacks Consensus Estimate by 14.7%. Revenues of $72.25 billion outpaced the consensus mark by 5%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Cencora has a long-term estimated growth rate of 8.6%. COR’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 6.7%.
Elevance Health reported fourth-quarter 2023 adjusted EPS of $5.62, beating the Zacks Consensus Estimate by 1.3%. Revenues of $42.45 billion outpaced the consensus mark by 1.5%. It currently carries a Zacks Rank #2.
Elevance Health has a long-term estimated growth rate of 12%. ELV’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 3.1%.
Cardinal Health reported second-quarter fiscal 2024 adjusted EPS of $1.82, beating the Zacks Consensus Estimate by 16.7%. Revenues of $57.45 billion surpassed the Zacks Consensus Estimate by 1.1%. It currently carries a Zacks Rank #2.
Cardinal Health has a long-term estimated growth rate of 15.2%. CAH’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 15.6%.
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