On Feb 11, we issued an updated research report on molecular diagnostics company Cepheid (CPHD).
Although, this leading provider of fully integrated molecular diagnostic testing systems reported better-than-expected fourth-quarter 2014 financial results on Jan 29, we are worried about the foreign exchange headwind which may impact on the stock grossly in the coming quarters.
The company reported adjusted breakeven earnings per share in the quarter, which compared favorably with the Zacks Consensus Estimate of a loss of 14 cents. Adjusted results also significantly exceeded the year-ago number of adjusted loss of 8 cents per share.
Likewise, revenues surged a solid 16.1% year over year to $131.5 million, comfortably beating the Zacks Consensus Estimate of $125 million. The top line also topped the company's guidance range of $122–$126 million.
Revenues surged on the back of a strong performance delivered by Cepheid's commercial clinical business in the reported quarter, which represented progress across the company's three primary growth leads, namely test menu expansion, customer segment expansion, and geographic expansion.
Also, the slightly stronger-than-expected revenues delivered by the Non-Clinical business contributed to the top-line improvement in the quarter. However, the weaker-than-expected performance at High Burden Developing Country (HBDC) systems partially neutralized these positives.
Cepheid is currently looking to expand its reach in both the U.S. and international markets. The company witnessed strong double-digit growth in its International Commercial Clinical business in the reported quarter.
Management believes, going forward,that Cepheid has ample opportunity in Europe for its test menu expansion. Cepheid also has a strategic interest to foray into emerging countries in Asia and Latin America and the high-focus Japanese market.
Management is confident that Cepheid will continue to experience impressive adoption and growing demand for both its new and existing Xpert tests. The company's near-term entry into the virology market, the recently expanded line of bacterial products and its foray into the women's health market is also expected to support this view of management.
However, we are wary about the foreign currency headwind, which even management anticipates will significantly impact the company's financial performance, particularly revenues in the second half of 2015. In fact, Cepheid's 2015 guidance for revenues and gross margin is projected to be negatively impacted by approximately $8 million due to the strengthening of the U.S. dollar, while the bottom line is likely to be affected by approximately $5 million or 7 cents per share.
The stock currently carries a Zacks Rank #3 (Hold).
Key Picks from the Sector
Medical instruments stocks such as ABIOMED, Inc. (ABMD), Inogen, Inc. (INGN) and Luminex Corp. (LMNX) are also worth reckoning. All three stocks sport a Zacks Rank #1 (Strong Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Be the first to comment