Why Cambrex Corp. Shares Were Clobbered

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 Cambrex (NYSE: CBM  ) , a life sciences company that provides active pharmaceutical ingredients and pharmaceutical intermediates to branded and generic drug developers, sank as much as 19% after the company reported fourth-quarter results and announced its full-year 2014 guidance.

So what: According to Cambrex's report, revenue increase 46.3% during the quarter to $103 million, while fourth-quarter EBITDA jumped to $22.2 million and adjusted earnings per share came in at $0.30 compared to a one-time tax benefit removed $0.22 last year. Both figures actually surpassed Wall Street's expectations for just $0.29 in EPS on $93.8 million in revenue. Cambrex's report notes strong branded active pharmaceutical ingredient sales offset by weaker sales of generic APIs. Looking at 2014, however, is where the wheels went flat. Cambrex forecasts EPS of $0.99-$1.10 on sales growth of 8%-12%, suggesting $340 million-$352 million in revenue. While the revenue figure meets the Street's forecast, the midpoint of EPS is modestly below the current consensus of $1.11.

Now what: Cambrex has had an incredible run over the past couple of weeks, so today's throttling seems fitting since its guidance simply didn't meet lofty shareholder expectations. However, I would certainly consider a decent pullback in this stock as grounds to give it a deeper look. It's clear that Cambrex's API portfolio is expanding and its top line is certainly capable of roughly 10% growth per year. This means plenty of growth potential for investors if Cambrex's share price continues to fall.

Cambrex may have risen significantly to start the year, but it'll likely have a hard time keeping up with this top stock in 2014
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