Why Cambrex Corporation 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 Cambrex (NYSE: CBM  ) , a life sciences company that provides active pharmaceutical ingredients (API) used in the manufacture of prescriptions and over-the-counter medication, tumbled as much as 15% after releasing first-quarter earnings results before the opening bell.

So what: For the quarter, Cambrex reported an 11% decline in revenue to $66.2 million, which the company attributed to the timing of certain branded and generic API orders. Gross margin for the quarter, subsequent to that order timing, dipped 8.2% to 25% as costs rose modestly. Net income tumbled 89% to $1.2 million, or $0.04 per share, compared to $11.4 million, or $0.37 per share in the year-ago quarter. By comparison, Wall Street had been expecting Cambrex to report a profit of $0.23 per share on $80.4 million in revenue. In other words, it missed the broad side of the barn! Cambrex did, however, reaffirm its full-year guidance of an 8%-12% increase in sales and $0.99-$1.10 in EPS.

Now what: Shares did get tagged for as much as a 15% loss earlier in the session, but they're now down less than 7% as of this writing, primarily because of Cambrex's EPS and sales reaffirmation. There's not a lot a company like Cambrex can do when its customers delay orders for a quarter or two. Generally, as long as a company's outlook remains consistent, days like today where short-term negative surprises stun investors can be bargain-hunting opportunities. With Cambrex capable of high single-digit or low double-digit growth for the foreseeable future, I'd certainly suggest that additional upside could be seen in shares over the long run.

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Sean Williams

A Fool since 2010, and a graduate from UC San Diego with a B.A. in Economics, Sean specializes in the healthcare sector and in investment planning topics. You'll usually find him writing about Obamacare, marijuana, developing drugs, diagnostics, and medical devices, Social Security, taxes, or any number of other macroeconomic issues.

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Related Tickers

8/28/2015 4:03 PM
CBM $47.86 Down -0.36 -0.75%
Cambrex Corp CAPS Rating: *****