What Happened?
Shares of life sciences company Avantor (NYSE: AVTR) jumped 6.1% in the morning session after activist investor Engine Capital disclosed it is pushing the company to explore a potential sale or make other strategic changes to boost shareholder value. In a letter to Avantor's board, activist investor Engine Capital, which revealed a 3% stake, suggested the life sciences company could be worth $17 to $19 per share in a sale. Alternatively, Engine Capital outlined recommendations, including refreshing the board and selling non-core assets, that it believes could drive the share price as high as $26 by the end of 2027. In response, Avantor reaffirmed its commitment to creating shareholder value, highlighting a $400 million cost-cutting program and a reduction in debt by nearly $1.5 billion over the last 18 months. The company also confirmed that Emmanuel Ligner is set to take over as CEO on August 18.
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What Is The Market Telling Us
Avantor’s shares are somewhat volatile and have had 13 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 10 days ago when the stock dropped 15.5% on the news that the company reported disappointing second-quarter results and cut its full-year financial forecast. The company’s adjusted earnings per share of $0.24 missed analyst expectations, while revenue slipped 1% to $1.68 billion. Profitability saw a sharp decline as net income fell to $64.7 million from $92.9 million in the same quarter of the previous year. The company's Laboratory Solutions division, a key revenue source, recorded a 3% drop in sales. Compounding these issues, Avantor lowered its financial projections for the full year, signaling to investors that it anticipated these headwinds would continue. The combination of missing current earnings and lowering future guidance prompted the negative investor reaction.
Avantor is down 42% since the beginning of the year, and at $12.29 per share, it is trading 55.6% below its 52-week high of $27.70 from September 2024. Investors who bought $1,000 worth of Avantor’s shares 5 years ago would now be looking at an investment worth $604.64.
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