Why WuXi PharmaTech (Cayman), Inc. (ADR) Shares Crashed

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 WuXi PharmaTech (NYSE: WX  ) have fallen more than 14% lower today after dropping by as much as 18% in early trading. The Chinese-based medical research company reported disappointing earnings and provided weak guidance after yesterday's closing bell.

So what: WuXi's first quarter produced $146.7 million in revenue, which was up 11% year over year and slightly ahead of the $145.4 million Wall Street consensus. However, earnings of $0.30 per share fell $0.09 short of what analysts want, and both top- and bottom-line guidance for the second quarter and the whole year now come in below Wall Street's expectations.

WuXi's second-quarter guidance expects revenue to range from $160 million to $162 million, with EPS in the $0.46 to $0.48 range. Wall Street had been seeking $164.5 million in revenue and $0.49 in EPS. WuXi's full-year guidance calls for revenue in the $660 million to $670 million range, with EPS in the $1.80 to $1.85 range. Wall Street had expected $670.7 million in revenue and $1.95 in EPS. WuXi's EPS guidance anticipates losses of $0.20 per share in foreign exchange forward contracts.

Now what: WuXi's EPS guidance still looks to top its 2013 EPS by about 14%, and revenue is expected to grow by roughly 39%. This divergence between top and bottom lines might worry investors somewhat, but a more reasonable assessment of this situation would simply highlight the divergence between WuXi's EPS and its share price over the past year. Over the past five years, WuXi's share price has grown nearly twice as much as its EPS, and the correction that began in early 2014 could simply be a return to trend. There may be a good bargain here, but with WuXi's P/E ratio still near multiyear highs, it's tough to say so right now. I'd watch cautiously for a better opportunity, which may arrive before too long.

WuXi may have serious trouble keeping up with THIS top stock
Give me five minutes and I'll show how you could own the best stock for 2014. Every year, The Motley Fool's chief investment officer hand-picks 1 stock with outstanding potential. But it's not just any run-of-the-mill company. It's a stock perfectly positioned to cash in on one of the upcoming year's most lucrative trends. Last year his pick skyrocketed 134%. And previous top picks have gained upwards of 908%, 1,252% and 1,303% over the subsequent years! Believe me, you don't want to miss what could be his biggest winner yet! Just click here to download your free copy of "The Motley Fool's Top Stock for 2014" today.


Read/Post Comments (0) | Recommend This Article (2)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2959491, ~/Articles/ArticleHandler.aspx, 8/28/2014 9:24:32 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated 12 hours ago Sponsored by:
DOW 17,122.01 15.31 0.00%
S&P 500 2,000.12 0.10 0.00%
NASD 4,569.62 -1.02 0.00%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

8/27/2014 4:02 PM
WX $37.06 Up +0.11 +0.00%
WuXi PharmaTech (C… CAPS Rating: ****

Advertisement