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Mixed 2Q for Luminex, Profit Dips - Analyst Blog

Posted
7/31/2012 1:15:00 PM
By: Zacks.com
Referenced Stocks:AFFX;LIFE;LMNX;SQNM

Luminex Corporation ( LMNX ) reported second quarter 2012 adjusted (excluding one-time charges) earnings of 7 cents per share, in line with the Zacks Consensus Estimate but lower than the year-ago earnings of 11 cents per share.

Profit generated was $3 million, down 36.4% from the prior-year quarter mainly due to higher operating expenses associated with the EraGen and GenturaDx acquisitions.

Revenues

Revenues rose 1.3% in the reported quarter to $48.3 million, slightly missing the Zacks Consensus Estimate of $49 million. Overall increase in revenue was primarily driven by solid growth in the Assay business, partially offset by lower System and Consumable sales.

Assay sales soared 89% to $17.5 million backed by the acquisition of EraGen Biosciences, which has been integrated into the company as Luminex Madison.

Revenues from System segment dropped 8% year over year to $8.4 million. The company shipped 278 multiplexing analyzers (including 167 MAGPIX systems) in the quarter, resulting in total life-to-date despatches of 9,162 analyzers, up 12% year over year.

Consumable sales plummeted 41% to $10.8 million due to tough year-over-year comparison. Royalty and All Other revenues grew 4% and 12% to $7.7 million and $3.9 million, respectively.

Margins

Gross margin in second quarter 2012 was 71%, flat year over year. Operating expenses were up 11.6% to $27.9 million, due to costs associated with the Luminex Madison and the GenturaDx acquisitions. Operating margin fell to 13.4% from 18.5% in the prior-year quarter.

Selling, general and administrative expenses (as a percentage of sales) were higher at 35.6% versus 34.6% in the prior-year quarter. Research and Development expenses were 20% compared with 16.7% in the year-ago quarter.

Balance Sheet

Luminex ended second quarter 2012 with cash and cash equivalents (including short-term investments) of $99 million, up 15.7% year over year. Long-term debt was $2.2 million, down 29.8%.

Guidance 

The company reiterated its revenue forecast in a range of $205 million - $215 million.

Recent Developments

Luminex recently announced a definitive deal to buy U.S.-based diagnostic testing company, GenturaDx. Per the agreement, Luminex will buy all the outstanding shares of the privately-owned company for $50 million in cash, subject to certain terms and conditions. In addition to $50 million, Luminex may end up making contingent payments based on the achievement of certain milestones and also on the basis of product performance.

The GenturaDx deal is in line with Luminex's strategy of pursuing acquisitions to drive growth. Luminex also possesses an extensive product portfolio and a healthy pipeline of novel assays, which are expected to support growth going ahead. The company submitted a de-novo 510(k) application to the U.S. Food and Drug Administration ("FDA") for its gastrointestinal pathogen panel ("xTAG GPP") assay.

In the quarter, the company was added to the S&P SmallCap 600 GICS (Global Industry Classification Standard) Life Sciences Tools & Services Sub-Industry Index.

However, Luminex operates in a highly competitive life sciences industry. The company competes with Affymetrix ( AFFX ), Life Technologies ( LIFE ) and Sequenom ( SQNM ), among others. Moreover, sluggish growth in its core markets is a challenge faced by Luminex. We are currently Neutral on the stock, which carries a short-term Zacks #4 Rank (Sell).


 
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