On Dec 2, 2014, Zacks Investment Research downgraded diagnostic test-kit maker Meridian Bioscience Inc. (VIVO) to a Zacks Rank #5 (Strong Sell).
Why the Downgrade?
Meridian’s dismal fourth-quarter 2014 results were the primary reason behind the downgrade. The company reported earnings of 20 cents per share, which missed the Zacks Consensus Estimate by a couple of cents and plunged 9.1% from the year-ago quarter owing to a 4.6% decline in revenues. Revenues of $46.7 million also lagged the Zacks Consensus Estimate.
Notably, Meridian missed the Zacks Consensus Estimate in the last three quarters.
The year-over-year decline in revenues can be primarily attributed to heightened competition from rival testing platforms, which negatively impacted illumigene sales. Moreover, decline in foodborne and legacy immunoassay lines and weaker shipments to a Japanese distributor also hurt revenues.
Meridian Bioscience reiterated its outlook for fiscal 2015. Revenues are expected in the range of $193–$200 million, while EPS is estimated between 85 cents and 91 cents. Although Meridian is benefiting from new product launches, multiple new technologies, approvals from U.S. FDA and Health Canada, stiff competition is expected to keep margins under pressure.
Owing to the present headwinds, analysts remain reasonably apprehensive, as is evident from the downward estimate revisions. Over the last 30 days, the Zacks Consensus Estimate fell 5.6% (5 cents) to 85 cents per share for full-year 2014 while the same for 2015 declined 2.2% (2 cents) to 91 cents.
Stocks to Consider
While we choose to avoid Meridian at present, better-ranked stocks include ICU Medical (ICUI), INSYS Therapeutics (INSY), and OraSure Technologies (OSUR). All three sport a Zacks Rank #1 (Strong Buy).
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