Thursday, July 28, 2011

Life Technologies (LIFE) 2Q 2011

Life Technologies (LIFE) shares fell 5.33% today after releasing second quarter results. The company reported increased revenues from $906 million to $945 million, a growth rate of 4%. Shrinking margins caused net income and EPS to fall, however, and under-perform analyst expectations. Net income fell from $175 million to $163 million, while non-GAAP earnings per share fell from $0.91 to $0.89. Analysts expected EPS of $0.95 and top-line revenues of $961 million.

The main drivers of the company's under-performance were lower sales in research lab products, a growth slowdown China, and the recent Japanese earthquake. Throughout the year, academic and private medical research has seen a drop in government funding, which has hurt the sales of their life sciences kits, a significant portion of their revenues. The firm has also seen an expected slowdown in the Chinese markets, as it has switched commercial strategies. Lastly, the earthquake in Japan disrupted the launch of a new genetic sequencer, which hurt profit margins as the firm was forced to sell the less profitable sequencer upgrades.

Going forward, budget cuts in the academic and private research realms will continue to hurt the sales of the company's kit products. Management expects the budget cuts to persist for at least the rest of the year. However, the firm now expects to see higher growth rats in China, as they reap the benefits of the strategy turnaround. In addition, as the effects of the Japanese earthquake fade away, the company will be able to sell the more profitable generic sequencers versions, as opposed to the upgrades at lower margins.


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