Diagnostic test-kit maker
Meridian Bioscience Inc.
) fourth-quarter fiscal 2013 earnings per share grew 4.8% year
over year to 22 cents from 21 cents a year ago, but missed the
Zacks Consensus Estimate by a penny. Earnings increased 6.7% to
$9.2 million from $8.6 million in the prior-year quarter. The
lack of any surprising element in the quarterly report led VIVO's
stock to inch up merely by 1.3% to $25.23 on Nov 11.
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For fiscal 2013, earnings of 92 cents per share climbed 10.8%
over the year-ago adjusted earnings of 86 cents per share. The
figure also beat the Zacks Consensus Estimate by a penny.
Adjusted earnings increased 11.8% to $38.0 million during the
Revenues grew 12.6% year over year to $49.0 million, a record
high for the company, and were in line with the Zacks Consensus
Estimate. Growth was led by robust sales of the flagship
illumigene product line.
For fiscal 2013, revenues again surged to a record high of $188.7
million, up 9% from the year-ago figure. Fiscal full-year
revenues were almost in line with the Zacks Consensus Estimate of
Gross margin in the fourth quarter slipped 20 basis points (bps)
to 63.1%, mainly due to the impact of the Medical Device Excise
Tax. Selling and marketing and general and administrative
expenses increased 5.5% and 26.6% to $5.8 million and $9.0
million, respectively. Research and development (R&D)
expenses were down 3.0% to $2.7 million.
On a positive note, VIVO's operating income in the reported
quarter was a record $13.3 million, up 10% year over year.
However, operating margin was 27.1%, 60 bps down from the
year-ago figure of 27.7%.
Effective from the fourth quarter, the company has combined its
U.S. Diagnostics and the European Diagnostics segments into a
single reporting segment viz. Diagnostics.
Revenues from the larger
segment surged 15.0% year over year to $37.3 million, driven by
the illumigene product line, particularly C. difficile assays and
Group B strep. The total global illumigene customer base now
stands at 1,182 labs. Moreover, in the immunoassay category,
rapid tests for food-borne diseases along with H. pylori tests
are delivering strong results. Operating income from this segment
improved 21.8% to $10.9 million, while operating margin climbed
150 bps to 29.2% in the quarter.
Management expects the illumigene molecular system to continue to
drive top-line growth during fiscal 2014 and plans to include 3
new tests into this family viz. illumigene Pertussis, illumigene
CT/NG and illumigene HSV. The company will submit illumigene
Pertussis for the U.S. FDA clearance this month. It also plans to
commence beta trials for the illumigene CT/NG assay with FDA
submission scheduled later in fiscal 2014.
Additionally, the Group A and Group B strep along with food-borne
and H. pylori rapid tests are expected to carry forward VIVO's
growth momentum in fiscal 2014. Further, the company has set a
target of 50 fresh customers every quarter.
Yet, at the same time, Meridian Bioscience continues to face
macroeconomic difficulties in the European market. However,
management is optimistic that the Meridian Bioscience Europe
business will deliver real organic growth by mid-2014.
Revenues from the
segment increased 5.5% to $11.7 million, led by the new MyTaq and
SensiFast products from the Bioline business. Revenues from this
segment were partially offset by flat sales from the core unit.
Operating income from this segment improved 21.8% to $10.9
million in the quarter, while operating margin dropped a whopping
600 bps to 20.5%.
We note that the Life Science unit is gaining significant grounds
in China, as Meridian Bioscience garnered more than $1 million in
revenues from this region. Moreover, Bioline is successfully
gaining from penetration in the industrial market for molecular
components. The new series of Bioline offerings and expansion
into global markets are expected to boost growth in this segment
in fiscal 2014.
Meridian Bioscience exited the quarter with cash and cash
equivalents of $44.3 million, 40.2% higher than $31.6 million as
of Sep 30, 2012. As of Sep 30, 2013, current assets were $114.1
million compared to current liabilities of $21.7 million,
resulting in working capital of $92.4 million and a current ratio
of 5.3. The company has 100% borrowing capacity under its $30.0
million commercial bank credit facility but doesn't have any
bank-debt obligations outstanding.
Further, management has raised its annual indicated cash dividend
for fiscal 2014 from $0.76 to $0.80 per share (up 5%). This
represents the first dividend hike since fiscal 2010 and the
nineteenth instance of the company raising its dividend payout.
Meridien Bioscience reiterated its outlook for fiscal 2014.
Revenues are expected in the range of $203 to $208 million, while
earnings per share are estimated between 98 cents and $1.03. The
bottom-line guidance is based on management's assumption that
average diluted shares outstanding will increase from
approximately 41.9 million at fiscal 2013-end to approximately
42.3 million at fiscal 2014-end.
The Zacks Consensus Estimates for revenues and earnings per share
for fiscal 2014 are pegged at $204 million and $1.00,
respectively. Both estimates lie within the range guided by the
We remain on the sidelines based on Meridian Bioscience's modest
fiscal first-quarter results. Although the company is benefiting
from new product introductions and increasing popularity of the
novel illumigene platform, tempered margins are affecting
profitability. Further, crisis in the European region is another
cause of concern.
Despite these shortcomings, VIVO's strategies and future outlook
appear reasonable. Prudent utilization of the company's cash
position to buy out accretive businesses and foster R&D
development should drive future growth.
Meridian Bioscience presently has a Zacks Rank #3 (Hold). While
we choose to stay neutral regarding VIVO, other companies like
Hill-Rom Holdings, Inc.
INSYS Therapeutics Inc.
) are expected to do well in the medical products industry. All
these stocks carry a Zacks Rank #1 (Strong Buy).