Recently, we issued an updated research report on
). The company reported a better-than-expected first-quarter 2014
with loss narrower than the Zacks Consensus Estimate and revenues
steering ahead of the mark. Moreover, an improved bottom-line
guidance for 2014 makes us confident about Cepheid's business model
that promises to retain the positive momentum over the long
Revenues surged 16.3% to $106.9 million, ahead of the Zacks
Consensus Estimate of $105 million. However, the company's loss per
share of 10 cents in the last reported quarter, although narrower
than the Zacks Consensus Estimate of a loss of 19 cents, was
substantially lower than the year-ago earnings per share of 2
Despite this, the company posted a decent outlook for 2014. It
expects total revenue in the range of $446-$461 million. The Zacks
Consensus Estimate of $457 million falls closer to the higher end
of the guidance range. However, Cepheid anticipates adjusted net
income in the range of 19 cents-24 cents per share, lower than the
earlier expectation of 24-29 cents. The current Zacks Consensus
Estimate of loss 40 cents per share remains far below the expected
Cepheid serves a fast-growing molecular diagnostic market with
strong demand for its tests. We believe that the ongoing efforts
for capacity expansion should enable the company to meet the market
demand for its offerings. The company expects to launch a gamut of
tests in the U.S. as well as the overseas market by the end of
2017. In our opinion, test menu expansion is a significant growth
catalyst for this molecular diagnostic company.
The company's quarterly top-line performance generates optimism.
The year-over-year revenue improvement came on the back of strong
market adoption of GeneXpert Systems and broadening reach of the
Xpert test portfolio. Growth was also driven by strong business in
High Burden Developing Countries (HBDCs) and improved performance
in the commercial clinical business.
Margin pressure however still remains an area of concern on
account of unfavorable mix toward the lower-margin HBDC business.
Also, a difficult capital spending environment continues to pose
challenges for Cepheid. The stock currently carries a Zacks Rank #3
Key Picks from the Sector
Nonetheless, medical instruments stocks such as
Natus Medical Inc.
Edwards Lifesciences Corp.
) are expected to do well. All the three stocks carry a Zacks Rank
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