Tuesday, October 26, 2010

LIFE 3Q Earnings

Life Technologies announced today their quarterly earnings for the third quarter FY2010 ending September 30th. They reported third quarter GAAP revenue of $867million. Their EPS was $0.56, and FCF was $187million. On a Non-GAAP basis revenue was $869 million which was an increase of 8% from $805 reported in Q3 of 2009. Non-GAAP gross margins were 66.8% 20 bp lower than prior years due to impact from mix of sales. Non-GAAP operating margin however was 29% which was an increase of 170 bp from last year’s 3rd quarter. This improvement resulted from acquisition related synergies and cost controls implemented this year.

Cash flow from operating activities for the third quarter was $215 million. Third quarter capital expenditures were $28 million and resulting free cash flow was $187 million. The company ended the quarter with $537 million in cash and short-term investments, including $19 million held as restricted cash. Regional organic growth rates for the quarter compared to the same quarter of the prior year were as follows: the Americas increased 8 percent, Europe 5 percent, and Asia Pacific 7 percent. Japan declined 1 percent. Revenue from orders transacted through Life Technologies’ eCommerce channels grew 26% percent during the quarter. Over 50% of all transactions are processed using eCommerce platforms.

LIFE beat expected EPS by 9 cents $0.87 over $0.78 Non-GAAP forecasted. Management has risen their guidance for FY 2010 to $3.48-$3.52 from $3.35-$3.50. With LIFE beating estimates again this quarter, it extends their record of beating estimates I believe now for as far back as Q1 2009. Afterhours the stock has been up 2%. Historically LIFE has seen significant slowdown in business during 3Q yet these were not far off of Q2. With management increasing their outlook I believe we should be seeing upside in the stock as the market prices management’s new guidance in. Furthermore, LIFE has been producing mid-high single digit organic growth since 2007 and this quarter’s organic growth was 6% providing evidence that management is capable of continuing this growth which will result in an increase of equity value. I will update the model with this quarter’s results and post my new price target.

-Michael Arias

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