Luminex Corporation (LMNX) reported fourth-quarter 2014 adjusted earnings per share (EPS) of 15 cents, which managed to beat the Zacks Consensus Estimate by 3 cents. However, adjusted EPS fell by a penny on a year-over-year basis.
Quarter Details
Luminex reported revenues of $58.1 million in the fourth quarter, up 5.3% on a year-over-year basis. The upside was primarily due to a solid performance at the company’s Assay business. Revenues were, however, in line with the Zacks Consensus Estimate.
Revenues generated from system sales declined 31.4% on a year-over-year basis to $6.9 million. Consumables revenues fell 10.6% to $10.8 million. Royalty revenues increased 10.0% on a year-over-year basis to $10.2 million.
Assay revenues surged an impressive 34% to $24.0 million. Infectious disease assay sales comprised approximately 67% of total assay sales for the quarter, with genetic testing assays representing 33%.
Gross margin expanded 680 basis points (bps) year over year to 73.6%. The upside may be attributed to higher revenues.
Research and development expenses, as a percentage of revenues, contracted 50 bps on a year-over-year basis, while selling, general and administrative expenses, as a percentage of revenues, remained almost flat.
Adjusted operating margin expanded 770 bps from the year-ago quarter, primarily on the back of higher revenue generation.
Financial Position
Cash and cash equivalents, as of Dec 31, 2014 were $91.7 million, compared to $89.1 million at the end of the previous quarter. Luminex had no long-term debt at the end of 2014.
Cash flow from operating activities improved to $16.1 million in the fourth quarter, compared to $11.5 million in the prior quarter. Cash flow from operating activities in 2014 amounted to $49.3 million, compared to $26.9 million in 2013.
Guidance
Luminex expects revenues for full year 2015 to lie in the range of $230–$236 million. First quarter revenues are projected between $55 million and $58 million. Management anticipates that consumables revenues will remain under significant pressure, due to inventory challenges faced by Luminex’s largest partner, Thermo Fisher Scientific (TMO).
Our Take
Luminex had a modest fourth quarter wherein earnings beat expectations, but revenues were merely on par with the same.
We are concerned with the volatility that persists with respect to consumables revenues. Owing to transitory inventory management challenges faced by partner firm Thermo Fisher Scientific, revenues from consumables tends to be under immense pressure.
However, Luminex’s Assay business continues to act as a primary growth engine for the company with impressive revenue generation. We are also encouraged by the company’s healthy product pipeline.
Luminex’s ARIES system, set to be launched in 2015, is expected to be a major revenue opportunity for the company. By offering targeted testing on an ARIES system along with syndromic panels through the company’s xTAG and NxTAG product lines, Luminex should enjoy a strategic advantage in positioning itself as the only company offering a complete testing solution to laboratories.
Zacks Rank
Currently, Luminex carries a Zacks Rank #2 (Buy).
Other top-ranked stocks in the medical instruments industry include Inogen (INGN), Synergetics USA (SURG) and ABIOMED (ABMD). All the three stocks sport a Zacks Rank #1 (Strong Buy).
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