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 (CBM +0.00%), 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.
