Recently, we reiterated our Neutral recommendation on MWI Veterinary Supply (MWIV) with a target price of $85.00.
MWI reported an EPS of 83 cents in the second quarter of fiscal 2011, up 33.9% from the year-ago period and ahead of the Zacks Consensus Estimate of 75 cents.
The company reported revenues of $367.1 million in the quarter, surpassing the Zacks Consensus Estimate of $351 million and 28.1% higher than the corresponding period last year. Through the acquisition of Centaur Services, the company is gradually creating strong base in the international market and adopting technological advancements. While 20.7% of the growth is attributable to business operations of the company in the US, 83.6% came from UK primarily based on the acquisition of Centaur Services.
Revenues over the last 10 years have grown at a CAGR of 20.2%. MWI’s expanding sales force fueled higher market penetration on the back of new customer wins and increased sales to existing customers. In addition, MWI has been trying to focus on value-added services including the e-commerce platform, pharmacy fulfillment programs for both production and companion animal products and other value-added services.
MWI seeks to maintain the growth momentum on the back of product expansion, higher sales force, improvement in operating expense structure and suitable acquisitions. Recently in March 2011, the company acquired Midwestern US-based Nelson Laboratories Limited, a distributor of animal health products to over 1,100 veterinary practices.
Moreover, MWI is focused on preserving long-term customer relationships as well as building new customer relations. Organic revenues attributable to existing customers represented approximately 38% of revenue growth during the reported quarter while new customers accounted for the rest. We feel these key strategies hold immense potential for the company’s future growth.
The company raised its fiscal 2011 outlook based on these factors. Given the execution skill of MWI and strong outlook provided by management, we have upped our estimates for both fiscal 2011 and 2012.
However, MWI operates in the highly competitive veterinary distribution services market, characterized by volatile commodity prices in milk, grain, corn and feeder cattle and changes in weather patterns to affect demand in the production animal market. The company competes with Henry Schein (HSIC) and Lextron Animal Health. We are also concerned about the vendor dependency of the company.
HENRY SCHEIN IN (HSIC): Free Stock Analysis Report
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