We have reaffirmed our neutral recommendation on
) with a target price of $51.00.
The company's second quarter adjusted earnings of 96 cents per
share missed the Zacks Consensus Estimate by a penny. Revenues
increased 1% to $950 million, ahead of the consensus of $944
We are encouraged by Life Technologies' adoption of several
initiatives to develop its diagnostics franchise. The company
recently entered into a Master Development Agreement with
) for companion diagnostic projects, who would work together in
oncology and other therapeutic areas.
The collaboration with Bristol-Myers is in line with the
company's strategy to build partnerships with pharmaceutical majors
for companion diagnostic development including participation in
early-phase clinical trials. Further, we are optimistic about the
company's companion diagnostic partnership with
) MAGE-A3 cancer immunotherapy. Life Technologies also strengthened
its diagnostics franchise with two tuck-in acquisitions -
Navigenics and Pinpoint Genomics.
Meanwhile, as a result of Life Technologies' increasing focus on
emerging markets, this region now accounts for approximately 10% of
total sales. The company has been experiencing growth in its
emerging markets as well as Asia-Pacific, where it is currently
expanding its operations.
After recording a temporary slowdown in its Greater China
business about a year ago, the company augmented its dealer model
and supplemented it with its own sales force. These efforts have
successfully restored operations in Greater China to normal levels
with high-teens growth.
Life Technologies' Genetic Analysis segment sales received a
strong boost from the Ion Torrent franchise. The company is
satisfied with the progress Ion Torrent technologies has made so
far and expects the growth momentum to continue. This growth will
be supported further by the recent launch of Ion Proton system in
September with the company continuing to take additional
However, the company has adopted a conservative outlook and
expects overall growth in the European region (which includes all
of the Europe and emerging markets in Russia, the Middle East and
South Africa) to be at the low end of the previous guidance -
approximately at 1%. Originally, Life Technologies had expected
growth in this region to be in the low single digits.
Moreover, the company now expects organic revenue growth for
2012 to be at the low end of the previously guided range of 2−4%
due to slower growth in Europe. Unfavorable currency movement is
another major headwind for the company.
To counter the various headwinds witnessed in its end markets
and bolster the bottom line, Life Technologies is deploying a
number of cost saving initiatives to strengthen its position.
Accordingly, the company's operating margin has also been expanding
over the past few quarters.
Our recommendation is backed by Zacks #3 Rank (Hold) in the
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