On Oct 29, Zacks Investment Research upgraded Luminex Corporation (LMNX) to a Zacks Rank #1 (Strong Buy) from a Zacks Rank #3 (Hold).
Why the Upgrade?
Luminex posted encouraging third-quarter 2014 numbers on Oct 27, with adjusted earnings surpassing the Zacks Consensus Estimate by a wide margin of 120%. Adjusted earnings (including stock-based compensation) of 22 cents per share also jumped sharply from a penny per share in the year-ago quarter riding on strong revenue growth and margin expansion.
Third-quarter revenues of $56.7 million grew 11.6% on a year-over-year basis, primarily driven by balanced growth across all of Luminex’s major assay product lines. The company’s third-quarter operational performance was also noteworthy, with gross and operating margins improving on the back of continued focus on cost control.
We are particularly encouraged by Luminex’s ARP segment which reported a 37.8% rise in its third-quarter revenues. Growth at the segment continues to be driven by improvement in both the xTAG and MultiCode product lines. Moreover, a 72% contraction of operating losses at this segment is worth mentioning. Meanwhile, management continues to develop the ARP segment via strategic acquisitions, considerable R&D investments and by building a direct sales force.
Luminex also has two compelling products in its pipeline – the NxTAG Respiratory Pathogen Panel and the ARIES system – which are expected to boost revenues and market share over time.
Though Luminex lowered its 2014 revenue guidance owing to near-term pressure on consumable and system sales, we expect long-term growth on the back of strength in the ARP segment, enhanced royalties and increased end user sales.
The long-term expected earnings growth rate for this stock stands higher at 21.5% compared with the industry growth of 17.1%.
Other Stocks to Consider
Other well-performing stocks in the medical instruments industry include AngioDynamics Inc. (ANGO), Alphatec Holdings, Inc. (ATEC) and Cynosure, Inc. (CYNO). While AngioDynamics sports a Zacks Rank #1 (Strong Buy), both Alphatec Holdings and Cynosure carry a Zack Rank #2 (Buy).
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