Several analysts have recently weighed in on Cambrex Corporation (NYSE:CBM), Dmitry Silversteyn of long Bow Research gives their Buy rating on the stock July 31, 2015 with a $60.00 price target, or 25% upside to the last closing price. Maynard Um of Wells Fargo also released a note to investors yesterday reiterating the firms Hold stance on Blackberry.
Raising target price. We are raising our 12-month target price from $48 to $60 on raised guidance for 2015 and improved project flow that points to a strong 2016. What’s Changing? CBM delivered $0.60 EPS beating our estimate as well as consensus and raised annual guidance to $1.97-$2.09 on improved revenue outlook of 20-24% improvement over 2014 ex-FX.
LBR and the Quarter. Cambrex delivered $107 million in sales, $5 million shy of our forecast, with the earnings beat driven by significantly stronger gross margin of 43.2%. Read-through. Increasing demand for Western API manufacturing capacity should be a positive for other fine chemicals manufacturers, including European majors such as Lonza.
Stronger 2015 outlook combined with a growing pipeline of Phase-III projects and new generic and controlled substances APIs should allow CBM to continue to deliver superior results and provide higher guidance that can sustain if not expand current multiples, driving materially higher share prices as earnings grow at 20%- plus.
We are raising our 3Q15E EPS modestly from $0.32 to $0.35 being cognizant of the seasonally low nature of the third quarter.
We are raising our 2015 EPS estimate from $1.76 to $2.05, the upper end of management’s new $1.97-$2.09 range.
We are initiating coverage on Cambrex Corp. with an Overweight/Vol. rating and $55 PT. As one of the leading providers of API, we believe CBM is poised to benefit from multiple trends that are becoming more prevalent in the pharmaceutical industry. In addition to a strong pipeline of small molecule compounds in development, CBM wins with continued increases in the outsourcing of manufacturing and greater focus on partners who adhere to cGMP. We believe increased capacity is the most bullish indicator for CBM and, encouragingly, the company is in the midst of a significant phase II expansion at its Iowa facility. These tailwinds manifest to support CBM’s solid combination of revenue/earnings growth and FCF and give us high conviction in our positive thesis.
We believe CBM is well positioned to capitalize on some very favorable trends in its industry. First and foremost, the development pipeline of small molecule compounds remains strong. To date, CBM has had the most success with small to mid-sized players in the pharmaceutical industry that don’t process their chemistry in house. The pipeline for 15 pharma players that fall in this category is strong, with a combined 42 and 23 Phase II and III projects. We do think that large pharma is becoming a more realistic target as well for CBM. 10 of the largest players have a combined 77 phase II and 46 phase III projects at this time. CBM also wins as more pharmaceutical companies are making the decision to focus primarily on drug discovery and sales/marketing, while outsourcing manufacturing. This reduces the initial cap ex for new facilities at large pharma (over $100 mil. for large processes) and, in many circumstances, greater cost and time efficiencies are still enjoyed. Additionally, we believe the trend is more toward domestic outsourcing (vs. prior of international/Asian), another factor that supports our view of healthy sustainable demand for CBM’s services.
Cambrex Corporation (NYSE:CBM) Cambrex Corporation is an innovative life sciences company that provides products, services and technologies to accelerate the development and commercialization of small molecule therapeutics. The Company offers Active Pharmaceutical Ingredients (APIs), advanced intermediates and enhanced drug delivery products for branded and generic pharmaceuticals. Development and manufacturing capabilities include enzymatic biotransformations, high potency APIs, high energy chemical synthesis, controlled substances and formulation of finished dosage form products.
Sep 02, 2015 Cambrex Corporation (NYSE:CBM) is pleased to announce that Greg Sargen, Executive Vice President and Chief Financial Officer, will present at the Wells Fargo Securities 2015 Healthcare Conference on September 9, 2015 at 1:10 p.m. EDT in Boston, MA.
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