Techne Corp. (TECH) reported adjusted earnings of 85 cents per share in the first quarter fiscal 2015, which was lower than the Zacks Consensus Estimate of 87 cents. However it increased 2.4% from the year-ago earnings of 83 cents.
Following the earnings news, shares of Techne Corp. fell 0.04% to close at $91.09 on Nov 3.
Quarter Details
Revenues came in at $108.4 million, up 21% from the year ago quarter. However, the revenues lagged the Zacks Consensus Estimate.
Net sales for Biotechnology segment increased 11% year over year to $81.5 million. Segment organic growth was 1%. China and U.S. biopharma market experienced growth. However a sluggish European market and the prevailing cost pressures in the U.S. academic market remain as headwinds.
The Clinical Controls segment reported revenues of $14.1 million, reflecting an increase of 13% on a year-over-year basis. Organic sales growth for the segment was 10%.
Following the close of the ProteinSimple acquisition, Techne started reporting a new Protein Platforms segment in the quarter. The segment reported revenues of $12.9 million for the months of August and September only.
Margins
Adjusted Gross margin contracted 230 basis points (bps) on a year-over-year basis to 72.1%. This was primarily driven by unfavorable product mix, following the acquisition of Novus and ProteinSimple.
Operating income declined 11.9% year over year to $5.2 million. Operating margin contracted 1350 basis points to 32.5 %.
Sales, marketing, general and administrative expenses increased 10% year over year to $13.6 million, which is quite understandable given the acquisitions.
Operating expenses increased 42.6% on a year-over-year basis to $37.8 million.
Financial Position
Cash and cash equivalents were $98.2 million, as of Sep 30, 2014, reflecting a decrease of $220.4 million from Jun 30, 2014. The decline can be attributed to the acquisitions made by the company.
Cash generated from operations were $35.7 million, highlighting a decrease of $2.2 from the last quarter. On the other hand, capital expenditures were $ 4.9 million, indicating an increase of $2.8 million from the previous quarter.
Our Take
We believe that Techne will benefit from the recent acquisitions, which will drive organic growth going forward. The company is also expected to benefit from a growing market in China. However, sluggish growth from Europe, particularly Germany will remain a headwind. The slowing US academic market also remains a concern.
Currently, Techne carries a Zacks Rank #3 (Hold). Better-ranked medical instrument stocks include AngioDynamics Inc. (ANGO), Fluidigm Corporation (FLDM) and Cynosure, Inc. (CYNO). While AngioDynamics and Fluidigm sport a Zacks Rank #1 (Strong Buy), Cynosure carries a Zacks Rank #2 (Buy).
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