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After Earnings Releases, a Slew of Revised Estimates

By a GenomeWeb staff reporter

NEW YORK (GenomeWeb News) – Following the release of their earnings results yesterday by Illumina, Life Technologies, Waters, and Becton Dickinson, several analysts revised their estimates for the firms.

Below is a round-up of changes made by some analysts and their thoughts on the financial results.

Illumina

The analyst community was bullish on Illumina following its announcement that first-quarter revenues for 2011 rose 47 percent year over year, and a number of analysts raised their estimates for the company.

Mizuho raised second-quarter revenue estimates to $272.9 million from $264 million and earnings per share to $.35 from $.34. Analyst Peter Lawson also hiked full-year 2011 revenue estimates to more than $1.12 billion from $1.09 billion. Full-year EPS was increased to $1.45 from $1.40.

"Sequencing appears to be firing on all cylinders, and a potential pause in array demand has yet to materialize, leaving only the concern of revenue visibility following the reduction in backlog," Lawson wrote in a research note. He gave Illumina a "Neutral" rating.

At Oppenheimer, David Ferreiro was more guarded and said in a note that while HiSeq placements "drove outstanding sales growth" for Illumina during the first quarter, the backlog in the instruments has largely dissipated, and "we question the company's ability to deliver the sales growth investors have grown accustomed to.

"We believe investors will become increasingly focused on the microarray franchise including product launches, as well as the competitive landscape in the non-core [next-generation sequencing] market in the lead-up to the MiSeq launch," expected in the third quarter of this year, he added.

Regardless, he raised revenue estimates for 2011 to $1.15 billion from $1.13 billion, and EPS to $1.49 from $1.40. Ferreiro has a "Perform" rating on the firm.

Isaac Ro at Goldman Sachs raised revenue and EPS estimates. For 2011, he revised revenues to $1.17 billion from $1.12 billion and EPS to $1.55 from $1.47. He also increased the 12-month share price target for Illumina to $83 from $81.

In a note, he said that Illumina is gaining market share from Affymetrix in the microarray space, "and the outlook for aggregate demand remains unchanged ahead of the mid-year launch of the 5M chip."

Ro has a "Buy" rating on Illumina.

RW Baird analyst Quintin Lai said in his note today that Illumina "remains the premier growth company in the life sciences space" and that the company could see "significant" double-digit top and bottom line growth in 2011 and 2012. He increased the price target to $80 from $76 and rated the company's shares "Neutral."

Key to Illumina's jump in revenues for the quarter was a 100 percent increase in sequencing instrument revenues, leading Amanda Murphy at William Blair to say that that could drive consumables sales in the future.

"Moreover our recent genome center channel checks suggest that genome centers are running their HiSeq in full production, which implies greater per instrument reagent usage than management's guidance of $300,000 to $400,000 in reagent usage per machine per year," she added.

Illumina also plans to increase the output on the HiSeq to 600 gigabases, and when that is achieved and as smaller labs start using the platform, "we expect consumable usage on the HiSeq to continue to increase and believe consumables represent by far the greatest upside opportunity for Illumina in 2011," Murphy said.

She increased her EPS estimate for 2011 by $.02 to $1.48, and added $20 million to her revenue estimates bringing it to $1.13 billion. She has an "Outperform" rating on Illumina's stock.

Life Technologies

Investment firms were less enthusiastic about Life Tech's 1 percent revenue increase year over year. While there is considerable buzz surrounding the Ion Torrent Personal Genome Machine — Oppenheimer's Ferreiro upgraded his estimate on the number of instrument placements to 625 by the end of the year from an earlier forecast of 475 — he also expressed concern that the problems that Life Tech's partner Hitachi High-Technologies experienced in the wake of the natural disaster in Japan could tamp down results in the second quarter, and as a result did not change his estimates for the company.

He is maintaining a revenue estimate of $3.81 billion and a $60 price target. He gave the firm an EPS estimate for 2011 of $3.85.

In a note, Goldman Sachs' Ro said that while Life Tech's valuation "remains compelling, we believe the company missed an opportunity to lower the bar on FY 2011 guidance. As a result, investors must now hope for accelerating quarterly revenue growth as the year progresses, and current guidance already incorporates the benefit of unannounced new products."

He lowered 2011 EPS estimates to $3.83 from $3.84, and revenue estimates to $3.81 billion from $3.85 billion. He rates the company's shares "Neutral."

Mizuho increased its second-quarter revenue estimate to $978.5 million from $969 million on the expectation that Life Tech will reduce its backlog from the first quarter due to the events in Japan. Analyst Lawson, however, shaved full-year revenue estimates to $3.81 billion from $3.82 billion because the company missed Wall Street estimates for the first quarter.

Lawson maintained EPS for the second quarter at $.96 and for the year at $3.88.

He increased the share price target to $62 from $58, and has an "Outperform" rating on the company's shares.

Waters

Lawson raised his 2011 revenue estimates to $1.84 billion from $1.78 billion and EPS to $4.85 from $4.65. He also increased the 12-month price target to $92 from $82.

He noted strength in Waters' European sales, as well as instrument sales, and better-than-expected pharmaceutical business.

In Europe, business grew 12 percent organically, which Lawson described as a surprise in light of austerity programs there, and in particular highlighted mass spec sales growth in Western Europe, double-digit growth in Eastern Europe, and positive performance from European pharma in general.

In fact, in the midst of reporting a 16 percent jump in total revenues, Waters said that growth in the broad pharma sector outpaced the company average. The firm's perspective on pharma is "turning more optimistic" Lawson wrote, although "we remain cautious over the long haul on traditional pharma."

On the instrument side, Waters said that sales rose more than 23 percent organically year over year and in his note on the firm, Ro said that Goldman Sachs "remains buyers of [Waters'] shares as our bullish thesis on H-class [UPLC] adoption continues to unfold."

He added that "[d]emand for H-class in pharma QA/QC labs continues to be strong with signs that major drug companies are broadly adopting the platform."

Based on that, Ro bumped up revenue estimates for 2011 to $1.86 billion from $1.83 billion, and EPS to $4.92 from $4.69. He also increased the 12-month share price target to $111 from $93 as a result of the strong Q1 results. Ro has a "Buy" rating on Waters.

The results also led Jefferies analyst Jon Wood to upgrade 2011 EPS to $4.85 from $4.60 "to reflect the stronger [first quarter] experience and expectations for more sustainable organic revenue momentum in the coming periods," he wrote in a research note.

He also increased revenue expectations to $1.84 billion from $1.77 billion and moved the price target to $100 from $85 on higher cash flow targets. He has a "Hold" rating on Waters.

Becton Dickinson

BD reported a 7 percent rise year over year in its fiscal second-quarter revenues. In his note on the firm, Wood pointed to BD's EPS of $1.38, exceeding his forecast of $1.34 "as strong core revenue growth and a lower tax rate more than offset a modestly weaker profitability experience that was primarily driven by Japan-related disruption."

As a result, he lifted his EPS forecast to $5.60 from $5.50 for 2011 "to reflect the [second quarter] upside and expectations for a continuation of a more amicable [foreign currency] environment." Revenue estimates were upped to $7.79 billion from $7.63 billion, and Wood increased the share price target to $98 from $96.

In his assessment of BD, Mizuho's Lawson increased his EPS estimate for the second quarter to $1.44 from $1.40 on "the strength of [BD's] buyback program," which added $.04 to EPS in the second quarter.

The company had previously said that it plans to buy back $1.5 billion in shares of its stock in fiscal 2011 and $600 million in fiscal 2012.

While he is maintaining second-quarter revenue estimates at $1.92 billion, Lawson raised estimates for the fiscal year to $7.67 billion from $7.61 billion. The EPS estimate for the year was raised to $5.65 from $5.50. He gave the company a "Neutral" rating.

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