On Aug 7,
) announced an initiative to reinvigorate its Assay and Related
Products ("ARP") Segment's Newborn Screening Group and Brisbane
office. This restructuring initiative is a part of its efforts to
counter the oncoming tough reimbursement environment.
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Management plans to reduce headcount by 5% as well as shutdown
the Brisbane office to realign resources in a better manner.
Luminex intends to use the savings from the restructuring
initiative to develop and market new molecular diagnostics
LMNX is expected to spend $7 million-$8 million for
restructuring. Out of this, half will be incurred in this quarter
(ending Sep 30, 2013), while the other half will be spent in the
subsequent two quarters. However, the successful completion of
the restructuring is expected to result in operating cost savings
of roughly $5 million to $6 million annually.
Meanwhile, Luminex reiterated its 2013 revenue guidance in the
range of $220 million−$230 million, up 9%-14% year over year.
However, the company expects revenues to be at the lower end of
the guidance due to reimbursement-related changes implemented by
the Centers for Medicare and Medicaid Services (CMS) from Jan 1,
Management is optimistic that the realignment strategy will boost
the company's overall growth. An increase in LMNX's share price
by 3% on Aug 7 reflects that the restructuring initiative is
boosting investor confidence as well.
Luminex possesses an extensive product portfolio and a healthy
pipeline of novel assays, which are expected to support growth
going ahead. Moreover, Luminex is developing innovative platforms
by combining resources from its latest acquisitions and strategic
partnerships. The company's initiative to establish a direct
sales force for its molecular diagnostics customers is likely to
improve operating efficiency.
However, Luminex operates in a highly competitive life sciences
industry. Moreover, the underlying market is anticipated to be
negatively affected in the near term by the current molecular
diagnostic related reimbursement changes implemented by the CMS.
This might result in sluggish sales of certain assays.
LMNX has a Zacks Rank #3 (Hold). Other medical instrument
companies that worth to look include
), both with a Zacks Rank #1 (Strong Buy), and
) with a Zacks Rank #2 (Buy).