Covance Earnings Preview

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Watch Covance's (NYS: CVD) earnings report to see if it can beat analyst expectations for the fourth consecutive quarter. The company will unveil its latest earnings on Wednesday. Covance is a drug development services company that provides a range of early-stage and late-stage product development services on a worldwide basis mainly to the pharmaceutical, biotechnology, and medical device industries.

What analysts say:

  • Buy, sell, or hold?: Analysts strongly back Covance, with nine of 16 rating it a buy and the remainder rating it a hold. Analysts like Covance better than competitor Charles River Laboratories overall. While analysts still rate the stock a moderate buy, they are a little more optimistic about it compared to three months ago.
  • Revenue forecasts: On average, analysts predict $543.7 million in revenue this quarter. That would represent a rise of 10.6% from the year-ago quarter.
  • Wall Street earnings expectations: The average analyst estimate is earnings of $0.73 per share. Estimates range from $0.71 to $0.74.

What our community says:
CAPS All-Stars are solidly behind the stock with 99.2% granting it an outperform rating. The community at large concurs with the All-Stars with 97.5% giving it a rating of outperform. Fools are bullish on Covance, though the message boards have been quiet lately with only 96 posts in the past 30 days. Even with a robust four out of five stars, Covance's CAPS rating falls a little short of the community's upbeat outlook.

Management:
Revenue has now gone up for three straight quarters. The company raised its gross margin by 6.6 percentage points in the last quarter. Revenue rose 12.8% while cost of sales rose 2.5% to $383.3 million from a year earlier.

Now let's look at how efficient management is at running the business. Traditionally, margins represent the efficiency with which companies capture portions of sales dollars. The following table shows gross, operating, and net margins over the past four quarters.

Quarter

Q3

Q2

Q1

Q4

Gross Margin

33.8%

34.6%

33%

49.6%

Operating Margin

8.8%

8.9%

7.9%

5.6%

Net Margin

7.0%

6.9%

6.2%

5.5%

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Earnings estimates provided by Zacks.

At the time this article was published

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