Covance Reports Significant Cost Initiatives

Goldman Sachs has published a research report on Covance, Inc. (NYSE: CVD) after the company reported 3Q EPS directly in-line with Goldman Sachs and Consensus.In the report, Goldman Sachs writes "CVD reported adjusted 3Q EPS of $0.50 (which excluded ~$0.01-$0.02 from 2Q cost actions), versus GS/consensus at $0.50. As was widely anticipated, CVD announced several cost-cutting initiatives including the reduction of toxicology capacity by closing the facility in Vienna, VA. The company anticipates a contribution of at least $25 million to operating income in 2011 (net of costs of $35-$40 million) from this closure and other cost reduction measures. In addition, CVD provided more detail around the recently announced 10-yr exclusive deal with Sanofi and now expects earnings contribution from the deal in 2011 of $0.20+. Not to be overlooked, the core businesses struggled this quarter where we saw further margin erosion in both segments on a year-over-year and sequentially basis. While the cost actions are substantial and will no doubt help to offset weakness in underlying business, we still think long-term sustainable share performance remains connected to improving fundamentals particularly within early-development."Goldman Sachs maintains its Neutral rating and $46 price target.Covance's conference call is today at 9:00am (888) 569-5033 passcode: 4350056.Covance, Inc. closed yesterday at $47.26.