On Feb 12, 2015, we issued an updated research report on MWI Veterinary Supply Inc. (MWIV) – a leading distributor of animal health products to veterinarians across the U.S. and U.K. Following last month's announcement of its acquisition by pharmaceutical distribution company AmerisourceBergen Corp. (ABC), MWI Vet reported a better-than-expected first quarter of fiscal 2015 beating our estimates on both lines. The stock currently carries a Zacks Rank #3 (Hold).
Given MWI Vet's leading positions in the companion and production animal markets worldwide, the combined entity, post acquisition, is expected to pose major competitive threat in this niche. Post-completion of the merger, the new entity will combine AmerisourceBergen’s knowledge of manufacturer and provider services, global reach, and partnership philosophy with MWI Vet’s expertise in veterinary and agricultural markets, and jointly launch the next generation of superior animal health products and services.
Once the transaction is over, we expect a new industry leader, delivering quality service and superior value for its customers and manufacturer partners, to surface in this space.
MWI Vet recorded earnings per share of $1.57 in the first quarter of fiscal 2015, up 8.3% year over year and ahead of the Zacks Consensus Estimate by a nickel. Revenues (including the impact of the IVESCO Holdings acquisition closed on Nov 1, 2013 and that of VetSpace acquired on Sep 2, 2014) increased 16.2% year over year to $798.5 million, comfortably surpassing the Zacks Consensus Estimate of $784 million.
We are encouraged by MWI Vet’s ability to deliver consistent, strong performance. The company has been on an acquisition spree to expand its presence in areas where it has low market share as well as to foray into new areas. The recent buyouts of Vetspace and IVESCO mark a step forward in this aspect.
However, we remain watchful of the company’s dependence on vendors to boost sales. MWI Vet faces challenging conditions in end-markets as well, which might affect its growth trajectory going forward. Moreover, a tough competitive landscape and macroeconomic uncertainty keep us on the sidelines. Further, if the merger with AmerisourceBergen remains incomplete or is delayed due to legal matters, it may weigh on MWI Vet’s stock price, operating results, prospects and financial condition.
Key Picks in the Sector
AmerisourceBergen currently carries a Zacks Rank #2 (Buy). Other top-ranked medical devices stocks include Cardinal Health, Inc. (CAH) and Laboratory Corp. of America Holdings (LH), both carrying a Zacks Rank #2.
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