What happened
Shares of Covetrus (CVET) rose on Tuesday after the provider of animal health technology, services, and software reported third-quarter results. While the company posted a large loss due to a noncash charge, revenue came in ahead of analyst expectations. The stock was up about 19.5% at 12:10 p.m. EST today.
So what
Third-quarter revenue was $1.02 billion, up 10% year over year and about $56 million higher than the average analyst estimate. Sales rose 4% on an adjusted basis, which accounts for revenue from Vets First Choice in the prior-year period. Covetrus was formed in early 2019 when the animal health business of Henry Schein was combined with Vets First Choice.
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A $939 million noncash goodwill impairment charge led to a GAAP net loss of $906 million. An impairment review was triggered by the steep decline in the stock over the past few months, leading the company to write down the carrying value of its reporting units. On a non-GAAP (adjusted) basis, net income was $19 million, down from $21 million in the prior-year period.
Now what
With revenue growing faster than expected, the market ignored the giant write-off. The market also ignored a slight reduction of the company's full-year guidance for adjusted EBITDA. Covetrus now expects adjusted EBITDA in a range of $190 million to $196 million, down from previous guidance of at least $200 million. Full-year revenue guidance calling for low-single-digit growth remained unchanged.
Shares of Covetrus are still down around 75% from their peak, so while the company's report was a mixed bag, it provided enough good news to propel the stock higher.