Recently, we reiterated our Neutral recommendation on Life Technologies (LIFE) with a target price of $56.00.
Life Technologies reported an adjusted EPS of 85 cents in the first quarter of 2011, in line with the Zacks Consensus Estimate, but down 2.3% compared to 87 cents in the year-ago quarter.
Revenues increased 1% year over year to $897 million, missing the Zacks Consensus Estimate of $920 million. While foreign exchange movement had a negative impact of 1 percentage point, prior acquisitions and divestitures contributed approximately 2 points to the reported revenue growth.
Organic revenue growth for the quarter was flat due to difficult year-over-year comparisons and the recent disaster in Japan. Excluding these items, organic growth for the quarter was 5%.
Over the past few years, Life Technologies developed a portfolio of innovative products, weighed towards high-margin consumables. During the reported quarter, the company introduced more than 20 new consumable products including addition to the TaqMan family of products, designed to detect mutations in cancer-related genes.
In order to drive growth in emerging markets, Life Technologies adopts strategies such as investing in infrastructure, increasing sales force and maximizing eCommerce capability. To achieve these objectives, the company has expanded its distribution network in Singapore and China as well as India, where it acquired LabIndia – a long-time distributor of Applied Biosystems’ products last quarter. The company is satisfied with the ongoing integration and has progressed in building a direct sales and support infrastructure for the region.
Life Technologies is adopting several strategies, which are expected to improve its operating efficiency going ahead. The company aims to improve its productivity by consolidating its manufacturing sites to fewer, more efficient locations and has closed 6 locations over the last few months. Moreover, the company is aiming at consolidating local sales offices globally, sharing services for back-office functions and a focus on making marketing programs more effective.
While these initiatives were being implemented for the past few months, the company is confident that through proper planning and execution, savings will be reflected in gross and operating margins in the second half of 2011.
However, Life faces significant competition in the life sciences market with the presence of players such as Illumina (ILMN), Qiagen (QGEN), among others. Moreover, some countries had frozen grants due to the economic condition. Although the global economic condition is improving gradually, any hiccup in the recovery process could act as a deterrent.
ILLUMINA INC (ILMN): Free Stock Analysis Report
LIFE TECHNOLOGS (LIFE): Free Stock Analysis Report
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