Life Technologies Corporation
) reported earnings per share ("EPS") of 72 cents in the first
quarter of fiscal 2012 compared with 50 cents in the year-ago
period. However, after taking into account certain one-time items,
adjusted EPS came in at 99 cents, ahead of both the Zacks Consensus
Estimate of 93 cents and the year-ago quarter's adjusted EPS of 85
Revenues increased 5% year over year (2% at constant exchange
rates or CER) to $939 million, surpassing the Zacks Consensus
Estimate of $921 million. The performance was marked by strong
growth in the Ion Torrent franchise.
On a regional basis, revenue growth of 2% was witnessed across
Europe, Asia-Pacific clocked 8% and Japan 7% while the Americas
remained flat. Life Technologies is successfully pushing sales from
the eCommerce platform, through which more than 50% of the
transactions are processed. During the reported quarter revenue
from orders transacted through this channel climbed 6%.
Life Technologies has modified its reporting and now books
revenues under Research Consumables, Genetic Analysis and Applied
Sciences. These three divisions recorded revenues of $420 million
(up 4% year over year or up 1% at CER), $356 million (up 7% or 4%
at CER) and $162 million (up 4% or 3% at CER), respectively, during
Research Consumables witnessed growth in cell culture workflow
products, endpoint PCR products and molecular and cell biology
consumables. Genetic Analysis sales were driven by robust growth of
Ion Torrent and CE products, partially offset by lower qPCR
royalties and lower sales of SOLiD products. At Applied Sciences,
sales bounded on the back of strong uptake of bioproduction,
forensics, animal health and food safety products.
Adjusted gross margin during the reported quarter expanded 30
basis points (bps) to 66.6% due to the rollout of currency hedges,
realized prices and increased manufacturing productivity, partially
offset by higher Ion Torrent instrument sales and lower royalty
To prepare itself for the challenging scenario, Life
Technologies over the past few quarters has been targeting
reduction in operating expenses. Accordingly, adjusted operating
margin expanded 200 bps to reach 30.2% in the reported quarter.
Life Technologies exited the quarter with $263.6 million in the
form of cash and short-term investments, lower than $881.9 million
at the end of December 2011 due to one-time payments such as the
Ion milestone payment of $193 million, the retirement of a final
convertible bond of $450 million, $185 million of share repurchases
and annual employee bonus payment.
Free cash flow during the quarter was $79 million ($98.4 million
at the end of the previous quarter) with $104 million of cash flow
from operating activities and $25 million of capital expenditure.
The company's debt burden declined to $2.3 billion from $2.75
billion at the end of fiscal 2011. With return on invested
capital of 9% at the end of the quarter, Life Technologies is
targeting the 10% level by the end of 2012.
Life Technologies reiterated its outlook for 2012. The company
still expects organic revenue growth of 2−4%, resulting in adjusted
EPS of $3.90−$4.05.
We are encouraged by the company's performance in the reported
quarter amidst macroeconomic challenges and constrained budgets
from customers. Life enjoys a strong position in the life sciences
market. The company prefers to maintain a cautious but optimistic
outlook for the remainder of the year. The impact of the economic
conditions on Life Technologies' peer
Thermo Fisher Scientific
) will be reflected in its earnings, scheduled to be released today
before the market opens.
Life Technologies experienced strong growth in its Ion Torrent
franchise, which drove Genetic Analysis sales. The company is also
progressing on its next-generation sequencing technology. We are
also impressed with the cost control initiatives undertaken by the
company that led to margin expansion during the quarter.
Over the long term, we have a Neutral recommendation on Life
Technologies. The stock retains a Zacks #3 Rank (Hold) in the short
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