PPDI was an overreaction today. Note the positive comments on PPDI by the Lehman analyst.
<<Covance Falls on Warning of Lower 3rd-Qtr Earnings (Update3) (Updates with closing share activity.)
Princeton, New Jersey, Sept. 8 (Bloomberg) -- Shares of Covance Inc., the second-largest manager of drug trials, fell 31 percent after the company said third-quarter earnings will be less than expected because it's lost market share.
Covance shares fell 4 7/8 to 10 5/8. Earlier, they reached a three-year low of 10 5/16. The company, which oversees the testing of new drugs for pharmaceutical companies, said yesterday it expects earnings of 21 cents a share for the quarter ending Sept. 30 before a pretax charge, well below the 26-cent average estimate of analysts surveyed by First Call Corp.
Covance blamed the lower earnings on fewer contracts for large clinical drug trials, the cancellation of a major project and the cutback of another, plus slower growth in its central laboratory business. It expects earnings of 91 cents to 93 cents for 1999, before growth picks up in the second half of 2000. ''They're not arguing that they can turn this ship around in the next quarter or two,'' said Robert Rouse, a Lehman Brothers analyst with an ''outperform'' rating on Covance.
The Princeton, New Jersey-based company also said it's cutting 150 jobs, half in the U.S. and the rest in Europe, which will save about $6 million a year. It will have a third-quarter pretax charge between $4 million and $5 million, it said.
Rouse estimated Covance will lose about $50 million in revenue during the next year and a half because of the canceled contract and scaled-back project.
The contract losses come as Covance recovers from the abandonment of its $526 million purchase of Parexel Corp. in June and the reorganization of its sales force, both of which hindered the company's ability to find new business, he said.
Shares of Covance's competitors, including the largest research firm, Quintiles Transnational Corp., and Pharmaceutical Product Development Inc., also fell.
Durham, North Carolina-based Quintiles shares fell 1 to 33 7/8, while Wilmington, North Carolina-based PPDI fell 3 3/8, or 15 percent, to 19 11/16. ''The drop in the share prices of both PPDI and Quintiles tell you investors believe that they are the next that are going to misstep,'' Rouse said. ''We don't believe that, because these two are stepping up and delivering the services their customers want.''>>
Source: quote.bloomberg.com |
