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Why Cambrex Shares Popped

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Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of life sciences company Cambrex (NYSE: CBM  ) shot higher by as much as 16% following the release of its fourth-quarter earnings results.

So what: For the quarter, Cambrex reported a 4.8% increase in revenue to $69.9 million, as gross margin expanded 60 basis points to 30% thanks to a better product mix and higher volumes of active pharmaceutical ingredients, or APIs, being sold. Net income rose to $44.2 million from just $3 million in the year prior because of a huge one-time tax benefit. Adjusting for one-time costs, Cambrex earned $0.26, which is double what Wall Street had expected. Looking ahead, Cambrex anticipates sales growth of 8%-12% in 2013 and EBITDA growth of 8%-18% to a range of $62 million-$68 million. This would imply full-year revenue at a midpoint of $303 million, and EPS getting close to $1 -- perhaps $0.01 or $0.02 shy. The lone analyst estimate for 2013 is calling for only $298.1 million in sales and $0.95 in EPS.

Now what: This was another great quarter for Cambrex, even if you consider that foreign currency translations knocked 90 basis points off its top-line revenue results. Its APIs are important components for many generic pharmaceutical companies, and, with opinion growing for cheaper alternatives to branded drugs, there's no reason to believe Cambrex can't continue to grow. As with all generic drug makers, it'll contend with margin contraction as competition heats up, but at just 13 times this year's earnings, I feel it could march even higher.

Craving more input? Start by adding Cambrex to your free and personalized watchlist so you can keep up on the latest news with the company.

While you can certainly make huge gains in biotech and life science companies like Cambrex, the best investing approach is to choose great companies and stick with them for the long term. In our free report "3 Stocks That Will Help You Retire Rich," we name stocks that could help you build long-term wealth and retire well, along with some winning wealth-building strategies that every investor should be aware of. Click here now to keep reading.

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Related Tickers

9/23/2016 4:02 PM
CBM $46.60 Up +0.30 +0.65%
Cambrex CAPS Rating: *****