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Q3 Earnings Preview for Covetrus (NasdaqGS:CVET)

in EARNINGS/INVESTING IDEAS by

Covetrus, Inc. (NasdaqGS:CVET) is scheduled to report Q3 earnings results after markets close for trading on November 10, 2020.

The company is expected to report earnings of $0.18/share on revenue of $1.049 billion. The consensus earnings per share (EPS) of $0.18/share is based on a poll of 7 analysts and represents a growth in eps of 7.8% over the same quarter last year, when the company reported earnings of $0.17/share.

The revenue forecast of $1.049 billion based on a poll of 6 analysts implies a year-over-year (YoY) growth in revenue of 3.1%. Last year the company reported $1.018 billion in revenue for the quarter.

Expected to report EPS growth of 7.8% for Q3, 2020
Metric Expected Prior Year YoY Change
Revenue $1,049.45 $1,018.00 3.1%
EPS $0.18 $0.17 7.8%

Earnings Call Trends

Historically, management has exceeded analyst expectations 4 out of the last 6 tracked quarters, and missed expectations 2 quarters.

What are your expectations from Covetrus, Inc. for earnings this quarter? Let us know in the comments!

Analyst Expected vs. Reported EPS
Quarter Expected Reported Surprise Result
Q2, 2020 $0.08 $0.27 219.3% Beat
Q1, 2020 $0.16 $0.18 13.9% Beat
Q4, 2019 $0.12 $0.18 45.7% Beat
Q3, 2019 $0.08 $0.17 116.5% Beat
Q2, 2019 $0.17 $0.13 −27.9% Missed
Q1, 2019 $0.17 $0.14 −19.4% Missed

In the following table, we summarize the company’s stock price movements after earnings releases. The “Price Day Prior” column shows the closing stock price on the day before the earnings report, and the “Price Next Day” column shows the stock price at the end of the trading day after the earnings report. After the last earnings report for the period ending June 30, 2020, the stock price reacted by falling −5.1%.

Stock Price Performance After Earnings
Report Date Price Day Prior Price Next Day Change % Result
August 11, 2020 $23.67 $22.46 −5.1% Decline
May 14, 2020 $10.93 $12.18 11.4% Increase
March 3, 2020 $10.90 $11.32 3.9% Increase
November 12, 2019 $10.05 $13.69 36.2% Increase

The other question to consider is one of earnings manipulation. There is a lot of pressure on management each quarter to deliver on earnings expectations. The Beneish M-Score is a statistical model that provides some insight into whether the company might be manipulating earnings. With a Beneish M-Score of −4.14, the model suggests that the company is not likely to be an earnings manipulator. A value of −4.14 implies a 0.0% chance of earnings manipulation.

Fundamentals And Technical Analysis

Covetrus, Inc. is currently trading at $28.29/share, up 3.3% for the day. The company is trading at approximately 98.3% of its 52-week high of $28.77/share. The company’s stock price is up 26.0% since the last earnings report and up 8.5% over the previous week. The company’s 14 Day Relative Price Index (RSI) of 68.38 suggests the company is trading in technically neutral territory. The RSI is considered overbought when above 70 and oversold when below 30.


NasdaqGS:CVET Stock Price Chart
Source: Finbox

The current share price implies a price-to-earnings (P/E) multiple of −3.68 and a forward P/E multiple of 38.03.

Covetrus, Inc.’s current share price also implies a price-to-book (P/B) multiple of 2.83. The following table summarizes some other key fundamental ratios:

Data as of November 8, 2020
Metric Value
Last Reported Fiscal Period Key FY2020.Q2
Period End Date June 30, 2020
Stock Price (Current) $28.29
P/E Ratio −3.7x
P/E Ratio (Fwd) 38.0x
PEG Ratio 0.0
Total Debt / Total Capital 23.2%
Levered Free Cash Flow $112 million
EV / EBITDA 43.6x

Finbox

Covetrus, Inc. is a mid-cap stock with a market capitalization of $3.606 billion and a total enterprise value of $4.579 billion. The company operates in the Healthcare sector and the Healthcare Providers & Services industry.

Covetrus, Inc., together with its subsidiaries, operates as an animal-health technology and services company. It engages in the sale of animal-health consumable products, including proprietary and Covetrus branded products, small equipment, laboratory products, large equipment, equipment repair services, branded and generic pharmaceuticals, vaccines, surgical products, diagnostic tests, infection-control products, and vitamins and supplements to wholesale and retail customers. The company also offers value-added practice solutions that include financial services, equipment repair, inventory management, and e-commerce, as well as continuing education services for practitioners. In addition, it provides practice management software systems for veterinary practitioners and animal-health clinics, client communication services, reminders, data backup services, and hardware sales and support services. Further, the company engages in the distribution of finished goods pharmacy and specialty pharmaceutical compounding products, as well as e-commerce, shipping, manufacturer incentives, service fees, and data integration and support services. It serves animal-health and veterinary practices, and clinics in the companion-animal and equine markets primarily in North America, Europe, and the Asia Pacific. The company, formerly known as HS Spinco, Inc., was incorporated in 2018 and is headquartered in Portland, Maine.

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