On Dec 2, we retained our Outperform recommendation on Affymetrix Inc. (AFFX). We are encouraged by the company’s recovery in generating earnings and appreciate its successful restructuring plan that focuses on high growth markets.
Why Retained?
On Oct 30, AFFX posted adjusted earnings per share of 5 cents in the third quarter of 2013, surpassing the Zacks Consensus Estimate of 2 cents and rebounding from the year-ago adjusted loss of 3 cents.
Revenues inched up 0.9% to $80.4 million, beating the Zacks Consensus Estimate of $79 million. Product revenues improved 2.9% to $74.8 million, while Service and other revenues dropped 18.8% to $5.6 million in the reported quarter.
Following the release of third quarter results, the Zacks Consensus Estimate for 2013 earnings surged 37.5% to 11 cents per share. The Zacks Consensus Estimate for 2014 earnings rose 6.7% to 16 cents per share. Currently, Affymetrix has a Zacks Rank #2 (Buy).
AFFX is a major provider of microarray technologies primarily used in the field of genetic research. The company has expertise in GeneChip Expression monitoring arrays, which are used to identify correlations between genes, determine their biological functions, and identify patterns that enable more accurate disease classification.
We are impressed with Affymetrix’s restructuring initiative which helped it post earnings for the first time in the 2013-second quarter and beyond since the first quarter of 2011. At the beginning of 2013, the company implemented a corporate restructuring plan intending to accelerate toward profitability. Management expects the corporate restructuring program to result in annualized savings of approximately $25 million based on 2013 run rates, of which $5 million is expected to be in cost of goods sold
Other Stocks to Look For
Other players that are currently performing well in the biomed/gene industry include Actelion Ltd. (ALIOF), Heska Corporation (HSKA), and AMAG Pharmaceuticals, Inc. (AMAG). All of them carry a Zacks Rank #1 (Strong Buy).
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