Diagnostic test-kit maker
Meridian Bioscience, Inc.
) reported third-quarter fiscal 2014 (ended Jun, 30) earnings per
share of 21 cents, a decline from the year-ago earnings of 24 cents
by 12.5% as well as the Zacks Consensus Estimate by a penny. Net
earnings decreased 13.0% to $8.8 million from $10.2 million in the
Meridian Bioscience, Inc - Earnings Surprise |
Expenses and Margins
Revenues in the quarter inched up a mere 0.2% to $47.2 million but
missed the Zacks Consensus Estimate of $49 million. The
year-over-year growth was led by robust sales of the flagship
illumigene product line.
Gross profit in the third quarter declined 4.5% to $29.2 million.
Consequently, the gross margin slipped 310 basis points (bps) to
61.9%, mainly due to the impact of the Medical Device Excise Tax.
Selling and marketing expenses rose 14.9% to $6.2 million while
research and development expenses increased 16.0% to $3.1 million.
General and administrative expenses remained flat at $6.7 million.
VIVO's operating earnings in the reported quarter stood at $13.1
million, down 16.4% year over year. Operating margin contracted 550
bps to 27.8% from the year-ago level of 33.3%.
Revenues from VIVO's larger
segment slipped 0.4% year over year to $35.2 million. Also,
operating earnings at this segment declined 14.4% to $10.5 million
and operating margin contracted 490 bps to 29.9%.
Revenues from the
segment increased 2.0% to $12.0 million. However, operating
earnings declined 24.5% to $2.7 million in the quarter, while
operating margin deteriorated a whopping 780 bps to 22.2%.
During the quarter, VIVO added 30 new illumigene customers and a
total of 94 new assays were installed in both new and existing
systems. The company's illumigene product line, H. Pylori category
and the Bioloine molecular components business made significant
contributions to growth.
However, VIVO's legacy C. difficile products continued to decline
gradually and new competition in the foodborne category also
dampened growth. The core Life Science business also faced a
difficult year-ago comparison.
VIVO exited the quarter with cash and cash equivalents of $39.3
million, 2.7% lower than $40.4 million as of Jun 30, 2013. As of
Jun 30, 2014, current assets stood at $113.4 million compared to
current liabilities of $16.9 million, translating into working
capital of $96.5 million and a current ratio of 6.7. The company
has 100% borrowing capacity under its $30.0 million commercial bank
credit facility with no bank-debt obligations outstanding.
Further, management declared a regular quarterly cash dividend of
20 cents per share for the third quarter of fiscal 2014 (indicating
an annual rate of 80 cents per share), reflecting a 5% increase
over the regular quarterly rate in fiscal 2013.
VIVO reiterated its outlook for fiscal 2014. Earnings per share are
estimated between 85 and 90 cents while revenues are expected in
the range of $190 to $195 million. The bottom-line guidance is
based on management's assumption that average shares outstanding
will increase to approximately 42.3 million at fiscal 2014-end from
approximately 41.9 million at fiscal 2013-end.
The Zacks Consensus Estimates for earnings per share and revenues
for fiscal 2014 are pegged at 86 cents and $193 million,
respectively. Both estimates lie within the range guided by the
We are disappointed with VIVO's weak third-quarter results with
both earnings and revenues missing our estimates. Although the
company is benefiting from new product introductions, multiple new
technologies and increasing popularity of the novel illumigene
platform, tempered margins are affecting profitability.
However, VIVO has a sound financial position and continues to focus
on its illumigene molecular technology platform. Further,
consistent investments in the company's core Life Science business
should drive future growth.
Meridian Bioscience presently has a Zacks Rank #4 (Sell).
Better-ranked stocks in the medical products industry include
OraSure Technologies, Inc. (
), Alere Inc. (
) and Boston Scientific Corp. (
). While OraSure Technologies sports a Zacks Rank #1 (Strong Buy),
both Alere and Boston Scientific carry a Zacks Rank #2 (Buy).
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MERIDIAN BIOSCI (VIVO): Free Stock Analysis
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