Thursday, July 29, 2010

LIFE Technologies posts solid earnings

LIFE released this morning, second quarter GAAP earnings per share of $0.58 and non-GAAP earnings of $0.91. Analysts interviewed by Reuters had an average expectation of $0.87(exculding special items). FCF for the second quarter was $203 million. Growth of revenue on a non-GAAP basis y/y was 8% rising from $839 mil to $906 mil. Managment has announced a share buy back program in which they are going to spend up to $350 mil. This will enhance existing shareholder value.

Revenue increase was caused by growth in genetic systems and cell systems divisions. Non-GAAP gross margin expanded to 67.7% a 100 bp improvement over the prior years period. This was a result of price realization, synergies, manufacturing productivity and royalty revenue partially offset by product mix. Non-GAAP operating margin was a record 30.1%, a 290 bp increase from last years period.

Growth by region over the prior years period was as follows, Americas grew 7%, Europe 4%, Asia Pacific 19% and Japan declined 4%. Revenue from LIFE's e-commerce website channel grew 14% during the quarter. Approximately 52% of all transactions are now processed using eCommerce platforms. This helps in lowering margins through automated online systems of ordering LIFEs products.

The company has updated its expectations for fiscal year 2010 to full year non-GAAP earnings of $3.35-$3.50. The stock was down today by 6% and closed at $42.40. Currently the stock seems to be oversold, and I think instiutional selling brought down the price today as portfolio managers may have been re-allocating their funds into other sectors. Another reason maybe the fact that historically the third quarter has usually been a slower quarter for LIFE. Regardless, I believe that my investment thesis remains intact and I will update my model with this quarters numbers.

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