MWIV Stays Neutral – Analyst Blog

We are pleased to note that based on a strong quarter, MWI raised its guidance for fiscal 2010. While revenue guidance has been narrowed to $1.16-$1.18 billion (previous guidance: $1.14-$1.18 billion), EPS is expected in the range of $2.40 – $2.45 ($2.26 – $2.32). If revenues meet expectations, it will represent a growth of 23% to 25% compared to revenues in fiscal 2009. The fresh guidance considers the future outlook of the company following the acquisition of Centaur Services.

 

Despite operating in a highly fragmented veterinary market, MWI has been able to maintain strong sales growth. The company has maintained a steady growth in revenues over the last few years. MWI’s expanding sales force has been able to increase market penetration by gaining new customers as well as increasing sales to existing customers. Value added services have also supported higher revenues.

 

In the past few years, MWI Veterinary Supply has made several acquisitions that expanded its operations further. The latest being the acquisition of UK based Centaur Services Limited, an animal health products supplier in February 2010. With this acquisition, MWI is looking to expand its presence in the international market. We believe long-term earnings growth will remain promising due to the company’s ability to integrate these acquisitions, thus adding value to its business.

 

Although we are impressed by the growth momentum maintained by the company, we remain concerned about the skewed nature of its vendor profile. In fiscal 2009, supplies from the ten largest vendors accounted for 74% of revenues. The loss of one or more of these large vendors, a material reduction in their supply of products to the company or material changes in terms of trade could negatively impact financial results.