MWI Vet Upgraded to Strong Buy on Solid Fundamentals

Zacks

On July 8, Zacks Investment Research upgraded MWI Veterinary Supply, Inc. (MWIV) to a Zacks Rank #2 (Buy) from Zacks Rank #3 (Hold) primarily due to inherent strengths backed by solid fundamentals.

Why the Upgrade?

MWI Vet has been witnessing rising earnings estimates on the back of strong second-quarter fiscal 2014 results. Moreover, this Idaho-based animal health products distributor delivered positive earnings surprises in 3 of the last 4 quarters with an average beat of 3.4%. The stock currently has long-term earnings growth expectation of 15.8%.

One of the key initiatives MWI Vet plans to follow during fiscal year 2014 includes constant implementation of warehouse management system in the remaining distribution centers. This in turn is expected to improve customer service in a cost-effective way for the company, apart from possible expansion of profitability.

Despite the U.S. veterinary market being highly competitive and fragmented, MWI Vet continues to emphasize on new sales regions. Moreover, over the long run, the company expects first-rate business on the back of its inventory management, ecommerce sales, pharmacy fulfillment programs and placement of Micro's technology platforms.

Per management, the strategic acquisition of the IVESCO assets is expected to boost the company's foothold in the production animal market, where it will now offer an enhanced product portfolio with improved supply chain performance.

The company expects fiscal 2014 EPS in the range of $5.47–$5.67, reflecting year-over-year growth of 10.5% to 14.5%. Management also expects revenue growth for the fiscal year 2014 in the range of 23% to 25%, which translates into revenues of $2.89–$2.94 billion.

Other Stocks to Consider

In the Medical/Dental-Supply space, AmerisourceBergen Corporation (ABC), Becton, Dickinson and Company (BDX) and Bio-Reference Laboratories Inc. (BRLI) are also performing well. All these stocks hold a Zacks Rank #2 (Buy).

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