Why Albany Molecular Research Inc. Shares Dipped

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 Albany Molecular Research Inc. (NASDAQ: AMRI  ) , a contracted drug discovery, development, and manufacturing service provider to the biotechnology and pharmaceutical industry, shed as much as 13% after reporting its second-quarter earnings results.

So what: For the quarter, EPS doubled to $0.12 as a 20% rise in contract revenue helped total revenue climb 19% to $59.3 million. With little analyst coverage, and following a huge run-up that has seen the stock quadruple in a year, these results would have appeared to please shareholders. What didn't, however, was the company's third-quarter and full-year guidance. For the upcoming quarter, Albany Molecular anticipates EPS of $0.09-$0.12 on revenue of $51 million to $53 million. The lone Wall Street estimate had called for $0.10 in EPS, but on $57.5 million in revenue. Furthermore, despite boosting the low-end of its full-year sales forecast to a range of $209 million to $213 million, this figure still appears well short of the lone full-year revenue estimate of $247.8 million.

Now what: Today, it appears that Albany Molecular is a victim of its size. Being a small-cap company, it doesn't garner nearly the same amount of analyst coverage that larger biotech and pharmaceutical companies do in the sector, leaving it susceptible to big earnings beats and misses each quarter. Despite the reaction, I'm impressed by Albany Molecular's growth in large scale manufacturing contracts. If it can continue to grow large-scale contracts by double digits, I'd surmise that this rally has a decent chance of continuing.

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