MDS Inc. Lowers Guidance as Q3 Disappoints

MDS Inc.'s (MDZ) third quarter results released Thursday are a disappointment to the Street who expected better operating performance from the life sciences company.

MDS reported net revenues of $298-million versus the Street's $344-million consensus and adjusted earnings per share excluding one-time items of $0.06 versus consensus of $0.08.

Desjardins analyst Maher Yaghi, who forecast revenues in the quarter to hit $329-million and earnings to reach $0.07, said revenues at MDS subsidiary Analytical Technologies missed forecasts due to weakness at Sciex, while MDS Pharma Services' profitability continued to be weak.

Results at MDS Nordion, a distributor of medical isotopes worldwide who are in the midst of a supply crunch. was in line with the analyst expectations.

To reflect the weakness at Pharma Services, MDS lowered its revenue guidance from $1.25 to $1.29-billion for the year to $1.23 to $1.25-billion. Its earnings guidance was also dropped from $0.27 to $0.33 to $0.15 to $0.23. 

Mr. Yaghi left his "hold" rating and $19.50 price target unchanged. 

In a note to clients, he said:

Overall, while we believe that the stock's valuation has become attractive after the recent pullback, we remain concerned given the continued margin pressure at Pharma Services and the weakness now being experienced within Analytical Technologies. 

We would seek enhanced visibility of a turnaround on these fronts before recommending that investors take or increase positions in the stock.