) third-quarter 2013 adjusted earnings per share of a penny
missed the Zacks Consensus Estimate of 12 cents per share by a
whopping 91.7%. Adjusted earnings were also down from the
year-ago level of 10 cents per share.
LMNX reported net income of $0.8 million or 2 cents per share,
compared with net income of $1.7 million or 4 cents per share in
the year-ago quarter. Molecular diagnostic-related reimbursement
changes implemented by CMS have been adversely affecting the
entire industry. This issue delayed an order from one of its
largest assay customers.
Revenues inched up a mere 1% to $50.8 million, but were lower
than the Zacks Consensus Estimate of $55 million. The
year-over-year growth was mainly dampened by unexpected delay in
completion of the aforementioned assay customer's order.
Gross margin in the quarter plunged 940 basis points (bps) to
60.6% due to pricing pressure, decline in the percentage
contribution of higher-margin Luminex Madison Assay sales, and
continued investment in customer and technical support functions.
Selling, general and administrative (SG&A) expenses grew
10.3% to $21.5 million, mainly on account of assuming full charge
of the molecular diagnostics channel. However, research and
development (R&D) expenses dropped 7.5% to $10.3 million.
Reported operating expenses were up 10.4% to $35.0 million. As a
result, LMNX reported operating loss of $4.2 million in the third
quarter compared with an operating income of $3.4 million in the
Quarter in Details
On a disappointing note, Assay revenues declined 2% to $16.1
million, mainly due to the delay in customer order execution. We
note that revenues dropped 25.8% on a sequential basis.
Infectious disease sales comprised approximately 64% of total
assay sales, with genetic testing representing 36% of the latter.
Revenues from the System segment dropped 11% to $7.6 million. The
company shipped 280 multiplexing analyzers during the quarter,
resulting in total life-to-date dispatches of 10,410 analyzers.
Consumable sales remained flat year over year at $12.8 million,
as stable purchase volume from Luminex's largest customer was
partially offset by headwinds from LSR focused partners. Royalty
and All Other revenues surged 17% and 18% to $9.0 million and
$5.3 million, respectively.
Luminex ended third-quarter 2013 with cash and cash equivalents
of $57.2 million, compared with $42.8 million at the end of 2012.
Long-term debt was $0.8 million, down from $1.7 million at the
end of 2012.
Luminex lowered its 2013 revenue guidance to the range of
$212−$217 million from the earlier guided range of $220−$230
million. The company remains cautious about the life science
research market given that LSR focused partners have now agreed
upon lower research budgets in the U.S. The current Zacks
Consensus Estimate is pegged at $222 million, which lies above
the guided range.
Following a strong second quarter, the sudden turn of events in
the third quarter is a significant cause of concern. Although the
company did warn of an adverse impact from the reimbursement
changes in the U.S., the significant miss at both fronts
demonstrates that the huge downfall was quite unexpected.
However, management views this reimbursement issue as a transient
phase and is confident that reimbursement rates for 2014 will
Luminex presently carries a Zacks Rank #4 (Sell). While we choose
to avoid this stock due to regulatory issues in the underlying
molecular research industry, other medical instrument companies
Natus Medical Inc.
) are expected to do well. All these stocks carry a Zacks Rank #1
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