) posted a 2.0% rise in 2014-first-quarter adjusted earnings per
share to 52 cents from 51 cents in the same quarter of 2013. Since
the earnings release, shares of the company rose 2.0% till
Alere reported a net loss of $11.5 million or 14 cents per share
for the first quarter of 2014, versus net earnings of $7.2 million
or 9 cents per share in the same quarter last year.
Net revenues came in at $716.6 million, down 3.1% from $739.2
million reported in the year-ago quarter. Revenues fell short of
the Zacks Consensus Estimate of $740 million. Adjusted net revenues
also declined by 3.1% to $717.0 million from $739.9 million in the
Reduction in revenues was mainly led by weak U.S. influenza sales
and larger-than-expected decline in U.S. healthcare utilization,
which primarily impacted Alere's U.S. infectious disease revenues.
Adjusted gross profit dropped 4.1% to $369.2 million while adjusted
gross margin went down 60 basis points (bps) to 51.5% in the
quarter. The deterioration in gross margin reflects lower U.S.
influenza sales and reduced mail-order diabetes reimbursement rates
in the reported quarter.
Adjusted operating income declined 12.6% to $108.3 million while
adjusted operating margin reduced 170 bps to 15.1% in the quarter
Net revenues from
dipped 2.7% to $566.5 million while adjusted net revenues decreased
2.8% to $567.0 million. The company's recent professional
diagnostics acquisitions contributed $21.5 million to overall
revenues, partially offset by a $6.4 million reduction in revenues
from the disposition of Spinreact in 2013. Adjusted operating
income deteriorated 9.1% to $122.2 million while adjusted operating
margin contracted 150 bps to 21.5% in the quarter.
Net revenues from
Health Information Solutions
fell 7.9% to $123.7 million due to the weak contracting season
experienced by Alere in the second half of 2013. However, Alere
posted narrower operating losses (on a reported basis) during the
quarter as compared to the prior year quarter which can be
accredited to lower operating expenses. Adjusted operating income
soared 32.7% to $4.0 million while adjusted operating margin
expanded 100 bps to 3.2%.
Net revenues from
scaled up 17.1% to $26.4 million. However, reported operating
earnings declined during the quarter which can be attributed to
higher operating expenses in the segment. Adjusted operating income
decreased 9.9% to $2.5 million while adjusted operating margin fell
290 bps to 9.6%.
Alere exited the 2014-first quarter with cash and cash equivalents
of about $433.0 million, up 19.7% from $361.9 million as of Dec 31,
2013. Total long-term debt and capital lease obligations decreased
slightly to $3,832.4 million from $3,843.2 million as of Dec 31,
2013. As a result, the long-term debt-to-capitalization ratio
declined marginally by 10 bps to 64.8% from 64.9% as of Dec 31,
Operating cash flow increased 48.9% year over year to $105.9
million while capital expenditures declined 23.8% to 27.5 million.
This resulted in a 124.0% rise in free cash flows to $78.4 million.
We are disappointed with Alere's drop in revenues for the first
quarter of 2014 mainly due to poor U.S. influenza sales and a large
reduction in the U.S. Healthcare utilization. However, Alere
managed to post modest earnings growth during the quarter which was
partly achieved through cost reduction measures.
Alere continues to face unexpected business challenges as well as
macroeconomic headwinds that affect the industry in general.
Nevertheless, given its focus on global market development in
addition to its diverse product portfolio, Alere is positioned to
perform well going forward.
Currently, Alere carries a Zacks Rank #3 (Hold). Some better-ranked
medical product stocks include
Mead Johnson Nutrition Company
). All these stocks carry a Zacks Rank #2 (Buy).
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