) reported first-quarter 2013 adjusted earnings of 2 cents per
share, significantly better than the Zacks Consensus Estimate of
loss of 2 cents per share and loss of 10 cents per share in the
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Adjusting for amortization expenses, Cepheid reported net income
of $0.3 million (or break-even per share) in the first quarter of
2013, a massive improvement from net loss of $5.5 million (or
loss of 8 cents per share) in the year-ago quarter.
Quarter in Detail
Revenues improved 19% year over year to $91.9 million in the
first quarter, edging past the Zacks Consensus Estimate of $90
million. Growth was led by the Healthcare Acquired Infections
(HAI) portfolio, Xpert Flu and Xpert CT/NG and ramp up in High
Burden Developing Country (HBDC) countries.
Among the segments, the Clinical segment (up 19% year over year
to $79.6 million) consisting of Clinical Systems (flat at $12.5
million) and Clinical Reagents (up 23% to $67.1 million)
contributed about 86.6% to the total revenue in the quarter.
Cepheid's Non-Clinical business revenues increased 18% year over
year to $12.3 million.
On a geographic basis, product sales from mainstay North American
market grew 17% year over year to $63.6 million whereas the
overseas market recorded a 24% year-over-year surge to $28.3
Placements of Cepheid's GeneXpert systems improved slightly with
its commercial Clinical business placements of 125 systems
(compared with 123 in the year-ago quarter). Placements as part
of the HBDC program were higher at 157 systems (151 in the
prior-year quarter). This is also a sizeable rise from 68
placements in the sequentially prior quarter. Including the HBDC
systems, a cumulative 4,117 systems (compared with 3,079 systems
in the year-ago quarter) have been placed worldwide as of Mar 31,
Gross margin was 53% in the reported quarter, down 100 basis
points (bps) from the year-ago period. The margin contraction was
on account of unfavorable mix.
Operating expenses amounted to $46.6 million, down 2.3% year over
year, on the heels of lower research and development (down 19.9%
year over year to $17.7 million) as well as general and
administrative (down 11.7% to $9.8 million) expenditure partially
offset by higher sales and marketing (up 31.7% to $19.1 million)
expenses. Adjusted operating profit was $2.4 million in the first
Cepheid exited the quarter with cash and cash equivalents of
about $102 million compared with $104 million in the prior-year
Cepheid reaffirmed its guidance for 2013. It expects revenues in
the range of $375-$385 million. The current Zacks Consensus
Estimate is $381 million. The company expects 2013 adjusted
earnings per share (considering the stock based compensation as a
regular expense) in the range of 1-7 cents. The current Zacks
Consensus Estimate of earnings per share of a penny, tallies with
the lower end of the guidance range.
According to the company, its guidance reflects heavy caution
related to choppy HBDC placements and contribution from newer
products like Xpert CT/NG. It also takes into account the
prolonged impact of Cepheid's order backlog due to supply lag on
account of manufacturing disruptions for most of the second half
We are encouraged with Cepheid's second consecutive quarter of
profitable growth. Another positive turnaround was the
improvement in HBDC system placements. With normal manufacturing
operations after a challenging 2012, we expect the company to
benefit from the soaring demand for its offerings.
Among the new products, expectations from the Xpert CT/NG test
are sky-high. Going forward, the test menu expansion is a major
catalyst to enhance the company's addressable market and fuel
Currently, the stock carries a Zacks Rank #1 (Strong Buy).
Another Zacks Rank #1 medical sector stock is
). Other stocks like
), carrying a Zacks Rank #2 (Buy) are also worth considering.