Covance beat analysts’ estimates for sales and adjusted earnings in the third quarter of 2013, while lower restructuring costs helped operating income to more than double over the same period last year.
Net revenues for the quarter ended 30 September 2013 were US$606.7 million, an 11.4% improvement over the third quarter of 2012. Analysts polled by Thomson Reuters were looking for revenues of US$595.4 million on average.
Operating income rose by 104.7% to US$62.6 million and EPS were 13.3% higher at US$0.78.
Without exceptional items, which included restructuring and other costs of US$4.9 million and US$18.1 million respectively in the second quarters of 2013 and 2012, as well as a US$2.6 million loss from facility closures in last year’s quarter, operating income for Q3 2013 came out 31.7% ahead at US$67.5 million.
Diluted EPS, ignoring the exceptional items, were up by 15.8% to US$0.83. The consensus from Thomson Reuters analysts was for third-quarter EPS of US$0.80.
Chairman and chief executive officer Joe Herring credited an “exceptional” performance in Covance’s central laboratory business (where revenues were up by 26% year on year), as well as continued strong results in clinical development, for the “better-than-expected” showing in the third quarter.
Net revenues in the Late-Stage Development segment, which includes central laboratories, grew by 19.2% to US$368.4 million, while operating income for the segment jumped 34.8% year on year to US$86.8 million.
In the Early Development segment, net revenues were virtually flat (+0.2%) at US$220.4 million. However, operating increased by 283.3% over the third quarter of 2012, to US$27.2 million.
The year-before quarter included both restructuring costs of US$17.2 million in Early Development (US$1.6 million in the latest quarter) and a loss of US$2.6 million on facility closures.
The US-based drug development services provider is expecting sequential growth in revenue and operating income for both its Early and Late-Stage Development segments in the fourth quarter of the year, despite increased spending on strategic information-technology programmes.
Accordingly, Covance has raised its guidance for pro forma diluted earnings per share (EPS) in the whole of 2013 from a range of US$3.10 to US$3.20 at the second-quarter stage to around US$3.20 now (this excludes gains on sale as well as costs associated with ongoing restructuring activities, and assumes foreign exchange rates will remain at 30 September 2013 levels).
Full-year revenue growth, previously forecast to be “in the high-single-digit range”, is now projected at about 10% versus 2012.
Covance delivered adjusted net orders of US$732 million and an adjusted net book-to-bill ratio of 1.21 to 1 for the third quarter of 2013.