Life Technologies Corporation
) reported earnings per share (EPS) of 63 cents in the fourth
quarter of fiscal 2012 compared with 51 cents in the year-ago
period. However, after taking into account certain one-time items
adjusted EPS came in at $1.11, in line with the Zacks Consensus
Estimate, but was 5.7% below the year-ago quarter's adjusted EPS.
The full-year adjusted EPS came in at $3.98, matching the Zacks
Consensus Estimate yet again, but was down 7.3% from the year-ago
Revenues declined 1.1% year over year on a reported basis.
However, the year-ago quarter considered the impact of a
licensing settlement, charges on a discontinued product and
purchase accounting related adjustments, totaling $40.1 million.
After adjusting for these one-time items, revenues in the
reported quarter increased 3% year over year (up 4.5% at constant
exchange rates or CER) to $999 million and surpassed the Zacks
Consensus Estimate of $990 million. Fiscal 2012 revenues were
$3.79 billion, almost in line with the Zacks Consensus Estimate
and up 2% (2.2% at CER) compared with the prior-year result.
On a regional basis, during the quarter, Europe witnessed
revenue growth of 5%, Asia-Pacific witnessed revenue growth of
18% and Japan witnessed revenue growth of 6%, while the Americas
recorded a flat year-over-year revenue.
At CER, year-over-year revenue growth came on the back of a
substantial hike in the Ion Torrent business, with continued
strong demand for the personal genome machine (PGM) and the Ion
Proton systems.Moreover, in the quarter, the company successfully
expanded its international footprint, with a special focus on the
high growth and emerging markets.
The three divisions of Life Technologies, viz. Research
Consumables, Genetic Analysis and Applied Sciences recorded
revenues of $409 million (up 2% year over year; up 4% at CER),
$401 million (up 2%; up 4% at CER) and $190 million (up 8%; up
10% at CER), respectively, during the quarter.
Research Consumables witnessed growth in cell culture
products, benchtop instruments and sample prep products, while
Genetic Analysis experienced growth in the Ion Torrent franchise
including the Ion Proton System and the Ion PGM benchtop
instruments, partially offset by a decline in SOLiD instrument
sales and in qPCR royalty revenue. At Applied Sciences, there
were strong sales of BioProduction and Forensics products.
On a reported basis, adjusted gross margin, during the
reported quarter, expanded 279 basis points (bps) to 63.1%. This
upside was primarilydriven by manufacturing productivity,
partially offset by a higher mix of instrument sales and
unfavorable currency rates.
The company recorded operating expenses (reported basis) of
$348.3 million, up 2.5% year over year with a 6.0% rise in
selling, general and administrative expenses,partially offset by
a 7.2% decline in research and development expenses. Life
Technologies, during the quarter, recorded a 150 bps expansion in
adjusted operating margin to 28.2%.
Life Technologies exited the fiscal with $276.4 million in the
form of cash and short-term investments, lower than $882 million
at the end of fiscal 2011.
Free cash flow for the quarter was $173 million ($177 million
at the end of the prior quarter), while cash flow from operating
activities were $221 million and capital expenditure was $48
million. The company's debt burden declined to $2.4 billion
(including senior notes of $2.3 billion plus some short-term
debt) from $2.75 billion at the end of fiscal 2011.
Life Technologies provided its fiscal 2013 guidance. The
company anticipates revenue growth of 3%-5% over 2012 revenues of
$3.8 billion, with an expected increase in the Ion Torrent
franchise sales for the third consecutive year and expansion in
applied and emerging markets.The current Zacks Consensus Estimate
for revenues of $3.9 billion remains below the expected range.
The company also expects 2013 adjusted EPS in a range of
$4.30−$4.45. The Zacks Consensus Estimate for earnings of
$4.35 per share remains within the guidance range.
A continuous share buyback program will also aid it by
lowering the outstanding share count. In 2012, 13.8 million
shares were repurchased for approximately $635
million.Additionally, year-to-date, the company already
repurchased 2 million shares for $105 million.
Economic uncertainties lowering discretionary spending and
fluctuations in currency were the major headwinds for Life
Technologies during the reported quarter.
However, over the last two years, the company has been focused
on creating an optimal portfolio of products through innovation
and acquisition, the latest being Ion Torrent. We are also
encouraged by Life's strategy to strengthen its presence in the
high growth markets such as Latin America, the Middle East, China
and India. Over the next few years, Life's focus on developing
industry-leading franchises in high-growth technology areas,
applied markets and emerging geographies will be the key drivers
of long-term growth. The company now carries a Zacks Rank #3
While we prefer to remain on the sidelines for Life
Technologies, other medical device stocks worth a look are
Merit Medical Systems, Inc.
). All these stocks carry a Zacks Rank #1 (Strong Buy).
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