Broyhill Asset Management, an investment advisor, released its fourth-quarter 2025 investor letter. A copy of the letter can be downloaded here. 2025 witnessed extreme market concentration and a strong focus on artificial intelligence, leaving many sectors behind. The Portfolio, which has been significantly reshaped, now trades at a substantial discount relative to the broader market. The firm strongly believes it will benefit as market fundamentals improve. For the year, the portfolio declined by 1.4%, un ...

Avantor (NYSE: AVTR ) is a distributor and manufacturer in the field of life sciences, biotech, and pharmaceuticals. Avantor supplies laboratories, research facilities, and drug manufacturers with millions of different consumables and equipment. Products are used in research, development, and production. Avantor has strongI focus on investment ideas about companies that pay a (healthy) dividend and have a clear potential for capital appreciation. I like to find good businesses which reward shareholders. The ...

Core Viewpoint - Three stocks have been added to the Zacks Rank 5 (Strong Sell) List, indicating a negative outlook for these companies based on recent earnings estimate revisions Group 1: Company-Specific Insights - Avantor, Inc. (AVTR) provides mission-critical products and services for life sciences industries, with a 9% downward revision in the Zacks Consensus Estimate for its current year earnings over the last 60 days [1] - Columbus McKinnon Corporation (CMCO) is a scientific and technical instruments company, experiencing a 26% downward revision in the Zacks Consensus Estimate for its current year earnings over the last 60 days [1] - The Kraft Heinz Company (KHC) operates in the food and beverages sector, with a 10.3% downward revision in the Zacks Consensus Estimate for its current year earnings over the last 60 days [2]

Group 1 - Avantor Inc. (NYSE:AVTR) is considered one of the most undervalued mid-cap stocks currently available for investment [1] - Bank of America analyst Michael Ryskin lowered the price target for Avantor to $11 from $13 while maintaining a Neutral rating due to a weak FY 2026 guidance [1][2] - Citi also reduced its price target for Avantor to $11 from $13, citing Q4 2025 results and FY 2026 guidance that fell below expectations, particularly highlighting the low earnings-per-share guidance of $0.15 to $0.16 [3] Group 2 - Avantor provides essential products and services across various sectors including biopharma, healthcare, education, government, advanced technologies, and applied materials globally [4]

Core Insights - Avantor, Inc. is a global provider of mission-critical products and services in the life sciences and advanced technologies sectors, competing with major players like Thermo Fisher Scientific and Merck KGaA [1] Financial Performance - Avantor's stock declined by 13.6% despite Q4 earnings exceeding expectations, with adjusted EPS at 22 cents, surpassing the Zacks Consensus Estimate by 4.8%, but down 18.5% year-over-year [3] - The company's revenue for the quarter was $1.66 billion, a 1.4% decrease year-over-year, yet it beat the Zacks Consensus Estimate by 3%, influenced by a 4.1% organic sales drop and cost pressures reflected in a 310 basis point contraction in adjusted operating margin [4] Insider Activity - Director SUMME GREGORY L executed a significant insider purchase of 100,000 shares at $9.40 each, increasing total holdings to 400,000 shares, which may signal confidence in the company's future prospects [2][6] Future Outlook - Avantor's 2026 guidance indicates expected challenges with organic revenue declines and EPS projected between 77 and 83 cents, although the company maintains a low debt-to-equity ratio of 0.0055 and a current ratio of 1.78, indicating strong liquidity [5]

Core Insights - Avantor, Inc. (AVTR) reported a fourth-quarter 2025 adjusted earnings per share (EPS) of 22 cents, a decrease of 18.5% year over year, but exceeded the Zacks Consensus Estimate by 4.8% [1] - The company's revenues for the quarter were $1.66 billion, down 1.4% year over year, yet surpassed the Zacks Consensus Estimate by 3% [2] - Despite beating estimates, shares of Avantor fell 13.6% following the earnings report [2][8] Revenue Details - Revenues of $1.66 billion reflected a 1.4% decline year over year, with a 4.1% organic sales decline after accounting for a positive foreign currency impact of 3.1% and a negative M&A impact of 0.4% [2] - The Laboratory Solutions segment reported net sales of $1.12 billion, down 0.9% year over year, with organic sales decreasing by 4.1% [3][4] Segment Analysis - The Laboratory Solutions segment showed mixed performance, with organic revenues declining 4% year over year, although there was modest sequential improvement [4] - The Bioscience Production segment's net sales were $547.5 million, down 2.4%, with organic sales also decreasing by 4.1% year over year [5][6] Margin Analysis - Avantor's gross profit declined 6.9% year over year to $523.9 million, with a gross margin contraction of 190 basis points to 31.5% [7] - Selling, general and administrative expenses increased by 5.7% year over year to $392.4 million, leading to an adjusted operating profit of $225.4 million, down 19.3% from the prior year [7] Financial Position - At the end of Q4 2025, Avantor had cash and cash equivalents of $365.4 million, up from $251.9 million at the end of Q3 2025, while total debt increased to $3.95 billion from $3.86 billion [9] 2026 Guidance - Avantor projects organic revenue growth to be between negative 2.5% and negative 0.5% for 2026, with adjusted EPS expected to range from 77 cents to 83 cents, below the Zacks Consensus Estimate of 89 cents [11][13] - The company anticipates that the VWR distribution business will modestly outperform Bioscience and Medtech Products, despite ongoing market pressures [11] Strategic Initiatives - Management emphasized a comprehensive "Avantor Revival" initiative aimed at operational improvement and sustainable growth, with significant investments planned to enhance operational efficiency and digital capabilities [16][17] - The company has achieved approximately $265 million in run-rate savings through cost discipline measures, although these have been partially offset by unfavorable mix and pricing actions [16]

Core Insights - Avantor is undergoing a "fundamental shift" in its operational structure, reorganizing into two new business units: a "product-agnostic channel" and a "channel-agnostic product business" [2] - The company has launched "Project Revival" aimed at sharpening strategic focus and improving execution, built around five key pillars [3][7] - Management has committed to the VWR brand for the channel business and plans significant investments in digital capabilities, including a $10 million to $15 million upgrade in 2026 [1][4] Financial Performance - For Q4 2025, Avantor reported revenue of $1.66 billion, a 4% decline year-over-year on an organic basis, with adjusted EPS of $0.22 and free cash flow of $117 million [5][13] - Full-year 2025 revenue was $6.552 billion, down 3% organically, with adjusted EBITDA of $1.069 billion and free cash flow of $496 million [14] - For 2026, the company anticipates organic revenue growth of -2.5% to -0.5%, with adjusted EPS guidance of $0.77 to $0.83 and free cash flow of $500 million to $550 million [6][22] Segment Performance - The new reporting segments will include VWR Distribution and Services, which accounted for approximately $4.4 billion of revenue in 2025, and Bioscience and Medtech Products, which represented about $1.8 billion [21] - In Q4, Laboratory Solutions revenue was $1.116 billion and Bioscience Production revenue was $548 million, both down 4% organically [16] - The company expects VWR to "somewhat outpace" growth in the Bioscience and Medtech Products segment due to challenging comparisons in the latter [19] Operational Strategy - Avantor has identified $20 million in investments to enhance customer service capabilities and established a project management office to coordinate efforts under Project Revival [8] - The company is focusing on organic revenue growth as a key metric for tracking the progress of its revival strategy [24] - Management noted that the biopharma end market remains healthy, with expected growth in biologics demand in 2026 and beyond [11]

Core Viewpoint - Avantor's shares are nearing critical lows due to a decline in organic sales and lower-than-expected earnings guidance for fiscal 2026 [1][4]. Financial Performance - Avantor reported sales of $1.66 billion, slightly above the consensus estimate of $1.64 billion, but experienced a year-over-year decline of 1.4% [1]. - The company faced a 4.1% decline in organic sales, influenced by a positive foreign currency translation impact of 3.1% and a negative M&A impact of 0.4% [1][2]. - Laboratory Solutions sales were $1.116 billion, reflecting a 0.9% decrease, while Bioscience Production sales were $548 million, down 2.4% [1][2]. Guidance and Expectations - For fiscal 2026, Avantor expects adjusted earnings per share to be between 77 cents and 83 cents, below the consensus of 90 cents [4]. - The company anticipates organic revenue to decline between 2.5% and 0.5%, with an adjusted EBITDA margin projected between 14.8% and 15.3% [4]. - Free cash flow for 2026 is expected to be between $500 million and $550 million [4]. Analyst Insights - Avantor shares are trading at 11.4 times the midpoint of the 2026 adjusted EBITDA guidance, compared to peers at 17.6 times and its own average of 15.5 times as a public company [5]. - Analysts note that while there is potential for outperformance as end-markets recover and cost savings are realized, the company's growth and margin profile remain below peers, justifying the current discount [6]. - The stock is rated as Market Perform by analysts [6]. Stock Performance - Avantor shares are down 15.46% at $9.44, with a trading range for the day between $9.86 and $8.89, and currently 4.7% above its 52-week low [7].

Financial Data and Key Metrics Changes - For Q4, reported revenue was $1.66 billion, down 4% year-over-year on an organic basis, aligning with guidance [15] - Adjusted EBITDA margin was 15.2%, and adjusted EPS for the quarter was $0.22, reflecting a decline of $0.05 year-over-year [15][16] - Full-year reported revenues were $6.552 billion, down 3% on an organic basis, with adjusted gross profit of $2.14 billion, representing a 32.7% adjusted gross margin [17][18] Business Line Data and Key Metrics Changes - Laboratory Solutions revenue for Q4 was $1.116 billion, a decline of 4% year-over-year on an organic basis [18] - Bioscience production revenue for Q4 was $548 million, reflecting an organic decline of 4% versus the prior year [20] - Adjusted operating income for Laboratory Solutions was $114 million for Q4, with a 10.2% margin, down 290 basis points year-over-year [19][20] Market Data and Key Metrics Changes - The biopharma end market remains healthy, with production levels growing and investments expected to expand capacity [10] - Early-stage biotech, education, and government markets faced challenges in 2025, but there are signs of improvement in funding environments [12] - The fourth quarter saw one of the best quarters for biotech funding in recent years, indicating potential recovery [12] Company Strategy and Development Direction - The Avantor Revival program focuses on five pillars: evolving go-to-market strategy, improving operations, optimizing the portfolio, simplifying processes, and strengthening talent [5][6] - The company will operate with two new business units: product agnostic channel and channel agnostic product business, enhancing customer focus [6][7] - Significant investments will be made in 2026, with a focus on driving sustainable, profitable top-line growth [9][10] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the future, noting that 2026 will be a year of transition and investment [9][36] - The company anticipates organic revenue growth of -2.5% to -0.5% for 2026, with FX contributing 1% to the top line [27] - EBITDA margins are expected to contract by 100-150 basis points in 2026 due to various headwinds [28] Other Important Information - The company welcomed new board members with significant global leadership and financial expertise [13] - A new Chief Operating Officer has identified $20 million of investment to enhance customer service capabilities [8] Q&A Session Summary Question: Growth expectations for VWR versus bioscience and medtech - Management indicated that VWR growth is expected to outpace bioscience and medtech due to difficult comps in the latter [38][39] Question: Balancing investments and cost-saving initiatives - Management emphasized the importance of maintaining cost discipline while investing in growth opportunities [41][42] Question: Margin guidance and stress-testing assumptions - The guidance is described as prudent, reflecting a balance of various moving parts impacting the P&L [47][48] Question: Impact of investments on margins - Investments in e-commerce and operations are expected to have a significant impact on margins, but specifics were not disclosed [48][49] Question: Industry growth rate under normalized conditions - Management noted the need for further evaluation to determine future growth rates under normalized conditions [58] Question: Clarification on book-to-bill greater than one - The book-to-bill greater than one refers to process chemicals, indicating a positive order book despite operational bottlenecks [66][67]

Financial Data and Key Metrics Changes - Reported revenue for Q4 was $1.66 billion, down 4% year-over-year on an organic basis, aligning with guidance [14] - Adjusted EBITDA margin was 15.2%, and adjusted EPS for the quarter was $0.22, reflecting a $0.05 year-over-year decline [14][15] - For the full year 2025, reported revenues were $6.552 billion, down 3% on an organic basis, with adjusted gross profit of $2.14 billion, representing a 32.7% adjusted gross margin [16][17] Business Line Data and Key Metrics Changes - Laboratory Solutions revenue for Q4 was $1.116 billion, a decline of 4% year-over-year on an organic basis [17] - Bioscience Production revenue for Q4 was $548 million, reflecting an organic decline of 4% versus the prior year [19] - Adjusted Operating Income for Laboratory Solutions was $114 million for the quarter, with a 10.2% margin, down 290 basis points year-over-year [18][19] Market Data and Key Metrics Changes - The biopharma end market remains healthy, with production levels growing and strong demand for biologics expected to continue [10] - Early-stage biotech, education, and government markets faced challenges in 2025, but there are signs of improvement in funding environments, particularly in Europe and Japan [12] - The fourth quarter saw one of the best biotech funding periods in recent years, indicating potential recovery in these markets [12] Company Strategy and Development Direction - The company is executing the "Project Revival" program, focusing on five pillars: go-to-market strategy, operations improvement, portfolio optimization, process simplification, and talent strengthening [5][6] - A significant shift in organizational structure has been made, creating two new business units: product-agnostic channel and channel-agnostic product business [6][7] - The company aims for sustainable, profitable top-line growth, with organic revenue growth rate being the most important metric to track progress [9] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the future, noting that 2026 will be a year of transition and investment to strengthen the company's foundation [9][36] - The company anticipates EBITDA margins will contract by 100-150 basis points in 2026 due to various headwinds, including investments and mix shifts [29][30] - Management emphasized the importance of self-funding investments through cost savings and operational efficiencies [52] Other Important Information - The company plans to invest $10 million-$15 million in upgrading its e-commerce platform in 2026 [8] - The board welcomed two new members, Sanjeev Mehra and Simon Dingemans, who bring global leadership and financial expertise [13] Q&A Session Summary Question: Expectations for VWR growth compared to Bioscience and Medtech - Management indicated that VWR growth is expected to outpace that of Bioscience and Medtech due to difficult comps in the latter [39][40] Question: Balancing investments and cost-saving initiatives - Management clarified that cost discipline remains a priority, and investments will be self-funded through cost savings [42][44] Question: Margin guidance and stress-testing assumptions - Management stated that the guidance is prudent, reflecting a balance of various moving parts impacting the P&L in 2026 [48] Question: Impact of investments on margins - Management noted that investments in operations and e-commerce will have a significant impact on margins, but specific quantification was not provided [49][50] Question: Book-to-bill ratio context - The book-to-bill ratio greater than one was noted for Process Chemicals, indicating a positive outlook despite operational bottlenecks [66][68] Question: Outlook for the Channel business and competition - Management expressed confidence in the Channel business's stability and growth potential, emphasizing recent investments and positive feedback from the market [75][76]