After reporting a disappointing second quarter 2012,
) preliminary results for the third quarter of 2012 were also below
the consensus estimate. The company is likely to report revenues in
the range of $79−$81 million, while the current Zacks Consensus
Estimate stands at $84 million for the third quarter. As per the
Zacks Consensus Estimate, Cepheid is expected to report earnings of
3 cents per share in the quarter.
The shortfall in revenues was primarily due to delay in the
supply of Xpert cartridge parts. Although Cepheid is addressing the
issue, order backlog at the end of the quarter would be
approximately $5 million, which will be shipped by October. As the
demand for the Xpert family of tests surged, the company failed to
maintain production at the required level.
Excluding the supply related issued, Cepheid could report
revenues in the range of $84−$86 million. We are impressed to note
that the company recorded strong contribution from the High Burden
Developing Country program following the first buy-down agreement
in early August.
Based on Cepheid's agreement with the Bill & Melinda Gates
Foundation, the United States President's Emergency Plan for AIDS
Relief, the United States Agency for International Development and
UNITAID, the price of Xpert MTB/RIF (the tuberculosis diagnostic
test) was reduced to $9.98 per test (from $16.86), the difference
being funded by the collaborators. However, commercial system sales
in the US remained weak due to a challenging environment.
The outlook for 2012 was reiterated at $333−$347 million.
Cepheid will provide an update on its earnings guidance during the
third quarter conference call, scheduled on October 18. The current
Zacks Consensus Estimate for 2012 stands at 2 cents per share.
At the end of the second quarter, the EPS guidance was lowered
for the second time in the year to 0−4 cents from the previous
level of 12−17 cents. At the end of fiscal 2011 Cepheid had
projected EPS of 17−24 cents for 2012.
In another development, a settlement has been reached with
) regarding patent litigation. As part of the agreement,
Cepheid will pay Abaxis $17.25 million in return of which, all
claims against it in the pending litigation have been dropped.
We have a 'Neutral' recommendation Cepheid. The stock retains a
Zacks #3 Rank (Hold) in the short term.
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CEPHEID INC (CPHD): Free Stock Analysis Report
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