Please ensure Javascript is enabled for purposes of website accessibility

Why Cambrex Corporation Is Tanking Today

By Brian Feroldi – Updated Apr 19, 2019 at 5:10AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Shares dropped after the company reported mixed earnings.

What happened

In response to reporting of fourth-quarter and full-year quarterly results, shares of Cambrex Corporation (CBM), a supplier to the life sciences industry, fell 11% as of 11:10 a.m. EST on Wednesday.

So what

Here are the headline numbers from the period:

  • Reported revenue was $134.3 million. However, the company recently switched to a new account standard called ASC 606. This change has a significant impact on the company's reported revenue. For that reason, management also shared what its revenue would have been if it was using the old revenue recognition standard. That figure would have grown 16% to $212.3 million. This number was below the $214.8 million that Wall Street had predicted.
  • GAAP income was $1.3 million, or $0.04 per share. 
  • Adjusted net income using the old revenue recognition standard would have been $48.7 million, or $1.44 per share. That was ahead of the $1.37 that market watchers were expecting.

The company also stated that it closed its $252 million acquisition of Avista Pharma Solutions on Jan. 2. 

Traders are selling off the stock today in response to the mixed results.

Three people looking at a computer screen and acting concerned.

Image source: Getty Images.

Now what

Cambrex's numbers are a bit of a mess right now due to the recent change to ASC 606 and because of elevated spending levels related to acquisitions.

Keeping that in mind, here's a look at the guidance that is being shared with investors for 2019:

  • Revenue is expected to grow between 21% and 25%. The midpoint of this range is higher than the 22% growth rate that was expected.
  • Adjusted income from operations is expected to land between $1.87 and $2.09. This is much lower than the $2.75 in earnings that were recorded in full-year 2018. It is also below the $2.97 that Wall Street was expecting.

Cambrex's numbers are going to be challenging for investors to understand until the changeover to ASC 606 and one-time acquisition costs are a thing of the past. Until that happens, the best thing that investors can do is focus on the long-term potential of the business and cross their fingers that management's acquisition spree will pay off. 

Check out the latest Cambrex earnings call transcript.

Brian Feroldi has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.