Alere Inc. (ALR) posted a roughly 20% rise in 2013-fourth quarter adjusted earnings per share to 61 cents from 51 cents in the same quarter of 2012. With this, earnings beat the Zacks Consensus Estimate of 56 cents. Since the earnings release, shares of the company rose 1.7% till yesterday.
Net revenues inched up 2.2% to $772.3 million in the fourth quarter of 2013 and came in line with the Zacks Consensus Estimate. Adjusted net revenues rose 2.2% to $772.8 million in the quarter from $756.5 million for the fourth quarter of 2012.
Adjusted gross profit rose 2.5% to $406.7 million while adjusted gross margin went up 20 basis points (bps) to 52.7% in the quarter. Adjusted operating income rose 4.2% to $136.2 million while adjusted operating margin improved 30 bps to 17.6% in the fourth quarter.
Segment Results
Net revenues from Professional Diagnostics grew 2.3% to $614.0 million while adjusted net product and services revenues increased by the same magnitude to $614.5 million. The company’s recent professional diagnostics acquisitions contributed $27.2 million to increase in overall revenues, partially offset by a $6.3 million reduction in revenues related to dispositions in the quarter. Adjusted operating income increased 2.6% to $147.9 million while adjusted operating margin rose 10 bps to 24.1% in the quarter.
Net revenues from Health Information Solutions fell 0.7% to $130.0 million in the quarter. The segment had adjusted operating income of $6.7 million compared to an adjusted operating loss of $2.6 million in the fourth quarter of 2012.
Net revenues from Consumer Diagnostics scaled up 13.8% to $28.2 million in the quarter. Adjusted operating income decreased 17.1% to $3.5 million while adjusted operating margin fell 470 bps to 12.6%.
Full Year Results
For full-year 2013, Alere revealed a 5.3% rise in net earnings to $2.19 per share from $2.08 per share a year ago. Net revenues rose 7.5% to $3,029 million while adjusted revenues went up 7.4% to $3,032 million in the year.
Adjusted gross profit rose 2.5% to $406.7 million while adjusted gross margin went up 20 basis points (bps) to 52.7% in the quarter. Adjusted operating income rose 4.2% to $136.2 million while adjusted operating margin improved 30 bps to 17.6% in the fourth quarter.
Financial Position
Alere exited 2013 with cash and cash equivalents of about $361.9 million, up 10.2% from $328.3 million as of Dec 31, 2012. Total long-term debt and capital lease obligations increased to $3,843 million from $3,709 billion as of Dec 31, 2012. As a result, long-term debt-capitalization ratio rose 200 bps to 64.9% from 62.9% as of Dec 31, 2012.
Operating cash flow for the year was $244.8 million while capital expenditures were 122.2 million. This resulted in a free cash flow of $122.6 million for the year.
Our Take
Diagnostic tests are shifting closer to the consumers and into the home testing market, as more diagnostic tests are developed to monitor patients rather than simply diagnose them. Alere's strategy of combining disease management with point-of-care testing (‘POCT’), in a manner that encourages patients to take responsibility over their overall health care, is viewed as a prudent approach while ensuring affordability at the same time. However, Alere continues to face challenges in its Health Information Solutions business.
Currently, Alere carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the medical products industry include NuVasive, Inc. (NUVA), Baxter International Inc. (BAX), and Covidien plc (COV). NuVasive carries a Zacks Rank #1 (Strong Buy), while both Baxter International and Covidien carry a Zacks Rank #2 (Buy).
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