What happened
Shares of Covetrus (CVET) lost 40% of their value on Tuesday, following the release of the company's second-quarter results.
So what
Covetrus' net sales fell 1% year over year $1 billion. That was below Wall Street's estimates for sales of $1.1 billion.
The veterinary technology company also posted a net loss of $10 million, or $0.09 per share. Analysts had been expecting Covetrus to report earnings of $0.17 per share.
"Q2 was impacted by challenges in North America and the UK," CEO Benjamin Shaw said during a conference call with analysts. "In the U.S. we saw moderating traffic in veterinary practices and declining sales of veterinary products purchased in distribution and resold to their clients."
Shaw went on to state that "unusual inventory activity in the UK related to Brexit" also weighed on Covetrus' second-quarter results.
Image source: Getty Images.
Now what
Worse still, Covetrus slashed its full-year guidance in part because of "end-market softness." Management now expects:
- Low-single-digit pro forma (adjusted) organic net sales growth, down from a prior forecast of 3% to 5% growth.
- Pro forma adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of at least $200 million, down from $235 million to $250 million.
"While we are disappointed in the revision to our 2019 outlook, we remain encouraged by the increased demand for our technology platform, which remains our strategic long-term driver of accelerated net sales growth and margin expansion," CFO Christine Komola said in a press release. "Longer-term, we are focused on driving additional efficiencies in our organization, executing against our stated value capture priorities, improving free cash flow, and deleveraging the balance sheet."
