Revenues Decline at American Oriental - Analyst Blog
November 16 2011 - 5:30AM
Zacks
American Oriental
Bioengineering’s (AOB) third quarter 2011 earnings
(excluding the gain on debt extinguishment) came in at 7 cents per
share, beating the Zacks Consensus Estimate by 2 cents. The
company’s adjusted earnings in the third quarter of 2010 were 7
cents per share. Earnings in the third quarter of 2011 were hurt by
lower revenues.
Quarter in
Details
Revenues in the third quarter of
2011 declined 41.1% to $53.9 million. Weakness in the manufacturing
segment (down 43.9%) was responsible for the slide. Revenues were
well below the Zacks Consensus Estimate of $70 million.
American Oriental earns revenue
from two operating segments – manufacturing and distribution. While
the manufacturing business accounted for approximately 91.1% ($49.1
million) of the company’s total revenue, the distribution business
– Nuo Hua generated the remaining revenues of $4.9 million.
American Oriental records
manufacturing revenues from two sources -- pharmaceutical and
nutraceutical products. Sales from the pharmaceutical product line
declined approximately 47.8% to $40.3 million. Sales of
nutraceutical products decreased 14.6% to $8.8 million in the
reported quarter. The change in product mix impacted revenues.
Gross margin at American Oriental
declined to 46.7% from 51.7% in the year-ago quarter. Increased raw
material prices coupled with the implementation of new tax rates
and surcharge brought down the margin.
Operating expenses in the reported
quarter declined 55.6% to $17.0 million. Research and development
(R&D) expenses were down 40.4% to $2.8 million. Selling,
general & administrative expenses decreased 42.3% to $12.1
million. American Oriental’s cost cutting initiatives resulted in
the decline. Advertising expenses plummeted 72.7% to $3.0 million
due to reduced promotion of over-the-counter drugs following
American Oriental’s shift in strategy.
Our
Recommendation
We currently have a Neutral
recommendation on American Oriental. The stock carries a Zacks #3
Rank (Hold rating) in the short run.
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