Techne Q2 Earnings, Revenues Miss Estimates but Grow Y/Y - Analyst Blog

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Techne Corp. ( TECH ) reported adjusted earnings (EPS) of 82 cents per share in the second quarter of fiscal 2015, which missed the Zacks Consensus Estimate by 4 cents. However, adjusted EPS increased 9.3% on a year-over-year basis, driven by improved sales.

Techne Corporation - Earnings Surprise | FindTheBest

Quarter Details

Reported sales surged 33.2% year over year to $111.9 million. However, the top line fell short of the Zacks Consensus Estimate of $113 million. Organic growth for the second quarter was 4%.

Acquisitions contributed 31% to the growth in revenues. Unfavorable foreign exchange had a negative impact of nearly 2% in the reported quarter.

Net sales at the Biotechnology segment increased 10% year over year to $78 million. Organic growth at the segment was 5%. In the second quarter, both academic and government markets recovered in the U.S. and Europe. The domestic bio-pharma market remained strong. Moreover, Techne gained from a robust Chinese market.

The Clinical Controls segment reported net sales of $13.7 million, reflecting an increase of 2% from the prior-year quarter. Organic growth at the segment was also 2%. The segment's sales in the second quarter were primarily hurt by the unfavorable timing of a shipment to a large OEM customer of Techne.

On Jun 17, 2014, Techne had announced an agreement to acquire ProteinSimple. Following the close of the ProteinSimple acquisition, Techne started reporting a new Protein Platforms segment. This particular segment reported revenues of $20.2 million in the second quarter of fiscal 2015. The Protein Platforms segment now includes the company's latest acquisition of CyVek in addition to ProteinSimple.

Adjusted gross margin contracted 170 basis points (bps) on a year-over-year basis to 71%. The downside was due to an unfavorable product mix, following the acquisition of Novus and ProteinSimple. Excluding acquisitions, gross margin was essentially flat year over year.

Adjusted selling, general and administrative (SG&A) expenses comprised 13.2% of sales, a contraction of approximately 270 bps on a year-over-year basis, whereas research and development expenses, as percentage of sales, declined 50 bps.

Adjusted operating margin expanded 110 bps on a year-over-year basis to 45.5%, primarily on the back of higher sales.

Financial Position

Cash and cash equivalents, as of Dec 31, 2014, amounted to $92.9 million, compared to $98.2 million, as of Sep 30, 2014. Cash generated from operations for the second quarter of fiscal 2015 was $35.7 million, which was flat compared to the previous quarter. On the other hand, capital expenditures increased 10.7% from the previous quarter to $3.1 million.

Our Take

Techne reported an unimpressive fiscal second quarter, with both earnings and sales lagging the respective Zacks Consensus Estimate.

We feel Techne's recent acquisitions of CyVek and ProteinSimple will drive organic growth for the company, going forward. The company should also benefit from a strong Chinese market.

However, ongoing anti-corruption audits being performed by the Chinese government are likely to impact the release of research funds in the region. These could impact revenues from China in the near term. Moreover, unfavorable foreign exchange rates continue to pose major hurdles for Techne.

Zacks Rank

Currently, Techne retains a Zacks Rank #3 (Hold). Top-ranked stocks in the broader medical sector include Inogen ( INGN ), Synergetics USA ( SURG ) and ABIOMED ( ABMD ). All the three stocks sport a Zacks Rank #1 (Strong Buy) and are worth a look over the short term.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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