Is Avantor a Buy as Revival Progress Faces Persistent Margin Pressure?

Avantor, Inc. AVTR is showing clearer signs that its Revival program is improving execution. VWR returned to growth sooner than expected, Bioscience & Medtech Products orders strengthened and management raised its 2026 outlook.

The recovery is not complete. Earnings remain pressured, margins have contracted and the product segment has yet to translate healthier orders into sustained revenue growth. That mix makes AVTR a selective investment case rather than a clear-cut bullish story.

Avantor's Revival Starts to Lift VWR Growth

VWR Distribution & Services posted 1.7% organic growth in the second quarter of 2026, returning to positive growth ahead of management's expectations. Higher volumes and stronger commercial execution were the main drivers.

Avantor strengthened large global customer relationships, accelerated contract onboarding and improved e-commerce activity after relaunching vwr.com. Direct traffic, conversion and daily sales improved as the quarter progressed, showing that Revival initiatives are producing measurable gains.

AVTR's BMP Orders Improve Before Revenue Does

Bioscience & Medtech Products (BMP) remained the weak spot, with organic revenues down 5.6% year over year. Fluid Handling and NuSil declined in the mid-teens, while Research & Specialty Chemicals fell in the mid-single digits.

BMP delivered double-digit order growth and a 1.1 times book-to-bill ratio, with healthy orders across all business units. Management expects organic growth to return in the second half of 2026, but order strength still needs to convert into sustained sales.

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Avantor's Margins Keep the Recovery in Check

Second-quarter gross margin fell about 120 basis points to 31.7%. Adjusted operating margin contracted 170 basis points to 13.3%, as lower volumes, unfavorable mix, inflation and higher freight costs pressured profitability.

A revenue recovery will have limited earnings impact without better operating leverage. Thermo Fisher Scientific TMO, which serves laboratory and biopharma workflows through technologies, purchasing channels and pharmaceutical services, is a relevant competitive reference point as Avantor works to strengthen customer retention.

AVTR's 2026 Outlook Improves but Earnings Stay Soft

Avantor raised its 2026 organic revenue growth outlook to negative 0.5% to positive 0.5% and lifted adjusted earnings per share guidance to 80-83 cents. The increase reflects better second-quarter performance and stronger second-half expectations for VWR.

The Zacks model still projects about 0.4% revenue growth for 2026 and a 10.7% decline in adjusted earnings per share. Agilent Technologies A, which supplies instruments, software, consumables and services across life-science, diagnostics and applied markets, provides another useful industry benchmark for Avantor's recovery.

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Avantor's Balance Sheet Offers Some Flexibility

Avantor ended the second quarter with about $307 million in cash and total debt of roughly $3.7 billion. Adjusted net leverage stood at 3.3 times, leaving the balance sheet improved but still moderately leveraged.

The company repaid $112.1 million of debt during the quarter and continues to prioritize excess free cash flow for debt reduction. Continued deleveraging can add flexibility, although progress also depends on sustained cash generation.

AVTR's Buy Signal Faces Weak Style Scores

Avantor's operating progress supports a more constructive view, but the evidence remains mixed. VWR is recovering, BMP orders are improving and guidance moved higher, while earnings and margins remain under pressure.

The stock currently carries a Zacks Rank #2 (Buy), a favorable near-term signal. Zacks Style Scores are most supportive at A or B, so AVTR's Value Score of C, Growth Score of D, Momentum Score of F and VGM Score of D do not reinforce the Rank. The split supports a selective stance while the recovery develops.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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