Saturday, January 30, 2010

Life Technologies 4Q earnings/09 annual earnings and 2010 outlook

Life Technologies released earnings this past Thursday 1/28. Earnings per diluted share for 4Q 2009 were GAAP $0.26 and on a non-GAAP basis was $0.80. This beat analyst expectations of $0.75, making it the 5th quarter in a row to beat earnings. Full year EPS on a GAAP basis was $0.80, and on a non-GAAP basis was $3.04. Revenue growth y/y rose 11% caused by double digit growth in Europe and Asia/Pacific and high single digit growth in the Americas and Japan. For the full year regional organic growth rates were as follows: the Americas increased 4 percent, Europe 9 percent, Asia Pacific 25 percent and Japan 4 percent.

Non-GAAP operating margin was 25.8 percent in the fourth quarter, representing an increase of approximately 300 basis points over the same period in 2008. The increase in operating margin primarily resulted from gross margin expansion and synergies. Full year operating margin was 26.6 percent; an increase of 300 basis points over the prior year, resulting from improved gross margin and decreased headcount and travel related expenses. Full year cash flow from operating activities was $715 million, capital expenditures were $181 million and free cash flow was $534 million.

For 2010 I see continued growth for Life Technologies. As I have mentioned before molecular research is a growing field of interest for governments and is evidenced by the 25% raise of organic growth in Asia Pacific. I continue to see this growth through 2010. Life Tech is also entering the flow cytometry market with the first of its kind flow cytometry system, Attune(TM), designed to use sound waves to precisely control the movement of cells, a 1.4 billion dollar market. Furthermore, In fact, by the second half of this year when the SOLiD 4hq package, an upgrade to SOLiD 4, will be available, researchers will be able to generate 300 gigabases of mappable data DNA at 99.99% accuracy. Management is predicting a non-GAAP EPS for 2010 of around 3.30-3.50. I maintain that a price target of 57.00 is a conservative one, and my model will be updated with 4Q numbers which will be sent out tomorrow.

----Michael Arias

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