The Columbia, Md.-based company indicated that second-quarter revenue rose 25.8% versus last year's second quarter, to $70.2 million. Earnings, meanwhile, surged 83%, to $6.3 million, which translated to $0.19 per share. Martek attributed its performance to strong domestic and international sales of infant formulas that use its nutritional oils, which contain docosahexaeonic acid (DHA) and arachidonic acid (ARA). These ingredients are believed to offer health benefits to newborns and adults.
Formula sales, particularly from one company, are likely to be a big factor in future results. Martek recently inked a 10-year agreement with Bristol-Myers Squibb's
The Mead Johnson deal appears to be good news, but it also has a possible downside, since it seems likely to increase Martek's dependence on the Bristol-Myers' unit. Admittedly, Martek has agreements under which Abbott Laboratories'
As long as Mead Johnson's business stays healthy, the nutritional products outfit's prospects also look good. Still, any slip in formula sales at Bristol Myers' unit would certainly be a major blow. Given its heavy revenue concentration, investors may want to be cautious on Martek.
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Fool contributor Brian Gorman is a freelance writer in Chicago. He does not own shares of any companies mentioned in this article.
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