As grim as it seems, some companies stand to benefit from coronavirus stockpiling. In fact, facing threats like this is part of some companies' business models.
Ansell Limited (ASX: ANN) produces face masks, protective gloves, respirators and many other physical protection devices for industry and healthcare use. All of these are currently subject to stockpiling for coronavirus; an issue that may impact many of us.
The Ansell share price fell 6% last week on the back of coronavirus fears. At the time of writing, Ansell shares have fallen another 1.18% today and are presently trading at $29.25 with a price to earnings (P/E) multiple of 17.8.
In the company's 1H20 earnings report, Ansell showed a lift in adjusted earnings before interest and tax (EBIT) by 4.8% against the previous corresponding period (pcp) and an 8.7% pcp increase in adjusted earnings per share (EPS).
The H1 report also called out the company's role in supplying personal protective equipment (PPE). In particular in China where Ansell is working with authorities to fast track its regulatory and import process in order to expedite supply.
Last Friday onn February 28, the company announced it had purchased more shares in its ongoing share buyback program which will add additional value to shareholders and boost EPS.
Over the past ten years, Ansell has demonstrated strong and consistent management in the PPE space. The Ansell share price has grown at a compound annual growth rate (CAGR) of 12% even though EPS has a 10-year CAGR of only 6.2%.
Stockpiling for coronavirus
Friday's Canberra Times article spoke of surgical masks being restricted at Brisbane airport due to limited supply. Even as early as the beginning of February, doctors were admonishing the public for stockpiling things like surgical masks.
These products are likely to face extra demand as long as coronavirus stockpiling continues. With the tragic fatality in Perth this weekend and the reports of stockpiling for coronavirus globally, I believe that the trend will continue.
Foolish takeaway
During global health events, companies like Ansell are part of the emergency response team. These companies are built partly to fulfill the need that epidemic (and pandemic) scares like this create.
Given the global trend of stockpiling for coronavirus, Ansell is already coming under pressure to manufacture PPE for health workers and will likely see earnings per share increase regardless of any share buybacks.
