There are two ways to increase earnings: increase revenue or decrease costs. Pharma-outsourcing specialist WuXi PharmaTech
Investors were surprised by the cost cutting at the China-based company and sent WuXi up a whopping 19% yesterday.
As Kendle International and Pharmaceutical Product Development
With yesterday's move, WuXi now seems to be the best performing contract research organization this year.
Company |
Year-to-date increase (decrease) in stock price |
---|---|
WuXi PharmaTech |
56.4% |
Charles River Laboratories |
28.2% |
Covance |
19.2% |
ICON |
15.3% |
Pharmaceutical Product Development |
(28.7%) |
Kendle International |
(57.6%) |
Source: Yahoo! Finance.
The slimmed-down company can't cut forever, and in fact expects gross margins to creep up in the second half of the year as it expands operations. But that's ultimately a good thing since it means revenue will start increasing again. In fact, the company is expecting this year's revenue to increase more than 6% year-over-year at the midpoint of guidance. By my calculations, that means it'll grow revenue by more than 12% in the second half of the year.
Looks like WuXi will be growing earnings both ways this year.
Looking for more China based companies with room to run? Check out this volatile company that the Global Gains team recently visited.