Covance Beats Estimates but Has a Dismal Quarter

Covance (NYS: CVD) reported earnings yesterday. Here are the numbers you need to know.

The 10-second takeaway
For the quarter ended Dec. 31 (Q4), Covance missed on revenues and beat expectations on earnings per share.

Compared to the prior-year quarter, revenue improved, and earnings per share dropped significantly.

Margins contracted across the board.

Revenue details
Covance reported revenue of $532.5 million. The 15 analysts polled by S&P Capital IQ looked for a top line of $547.3 million. Sales were 12% higher than the prior-year quarter's $491.5 million.


Source: S&P Capital IQ. Quarterly periods. Dollar amounts in millions.

EPS details
Non-GAAP EPS came in at $0.73. The 19 earnings estimates compiled by S&P Capital IQ anticipated $0.73 per share on the same basis. GAAP EPS of $0.35 for Q4 were 23% lower than the prior-year quarter's $0.46 per share.


Source: S&P Capital IQ. Quarterly periods. Figures may be non-GAAP to maintain comparability with estimates.

Margin details
For the quarter, gross margin was 27.6%, 20 basis points worse than the prior-year quarter. Operating margin was 6.7%, 300 basis points worse than the prior-year quarter. Net margin was 3.6%, 190 basis points worse than the prior-year quarter.

Looking ahead
Next quarter's average estimate for revenue is $536.8 million. On the bottom line, the average EPS estimate is $0.66.

Next year's average estimate for revenue is $2.21 billion. The average EPS estimate is $2.94.

Investor sentiment
The stock has a four-star rating (out of five) at Motley Fool CAPS, with 318 members out of 326 rating the stock outperform, and eight members rating it underperform. Among 125 CAPS All-Star picks (recommendations by the highest-ranked CAPS members), 124 give Covance a green thumbs-up, and one give it a red thumbs-down.

Of Wall Street recommendations tracked by S&P Capital IQ, the average opinion on Covance is outperform, with an average price target of $59.00.

At the time this article was published Seth Jayson had no position in any company mentioned here at the time of publication. You can view his stock holdings here. He is co-advisor ofMotley Fool Hidden Gems, which provides new small-cap ideas every month, backed by a real-money portfolio. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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