VCA ups 2016 forecast on double-digit Q1 sales and profit growth

VCA ($WOOF), a leading chain of animal hospitals in the U.S. and Canada, has been pursuing a strategy of growth through acquisition. And if the first quarter is any indication, that tactic is paying off for the Los Angeles-based company.
On April 27, VCA announced that during the first quarter, its revenues jumped 12.8% year-over-year to a record $563.4 million and its operating income was up 24.5% to $86.1 million. That was enough to prompt the company to boost its guidance for the full year, stating it expects revenues to come in between $2.39 billion and $2.41 billion and that net income will be somewhere between $210 million and $218 million.
That would translate to earnings per share of $2.82 to $2.92. On average, analysts had been expecting EPS of $2.78 this year, according to Thomson Financial Network. Shares of VCA bumped up 2% to $62.86 the morning of the announcement.
“We have continued to experience increasing organic revenue growth and gross margins in both our core Animal Hospital and Laboratory business segments,” said CEO Bob Antin in the earnings release. That combined with the company’s “acquisition pipeline” prompted the increased guidance, he added.
VCA’s recent acquisitions include its purchase of Abaxis’ ($ABAX) point-of-care diagnostics business for $21 million last year. In March of this year, VCA paid $344 million for Companion Animal Practices North America (CAPNA), a chain of 56 animal hospitals. Antin said in the earnings release that if the CAPNA deal closes this quarter as expected, it could add a few cents to the company’s EPS.
In a conference call with analysts after the earnings release, Antin said several forces converged to produce the better-than-expected results. Average revenues per order in the company’s hospitals increased, he said, because pet owners no longer cringe when veterinarians suggest extra procedures for pets. “I’ve said for a long time, price for us is not just pure price,” Antin said. “It’s really the intensity and the mix of the services.”
VCA is also starting to leverage all of the services it offers to drive additional revenues, he said. One of VCA’s properties, a doggy day care chain called Camp Bow Wow, offers a bit in the way of medical consultations to its customers–referring them to the hospitals to obtain required vaccines for their dogs, for example. In the future, those relationships might intensify even more, he said, as the company looks for opportunities to add Camp Bow Wows to VCA hospitals. “I think that’ll be synergistic,” Antin said.
– here’s the earnings release
– access a transcript of the earnings call at Seeking Alpha
Related Articles:
VCA division Antech buys Abaxis vet-lab assets for $21M
VCA charges ahead with $344M deal for vet hospital chain CAPNA
Read More: