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Wall Street Analysts Lower Life Tech Estimates Following Disappointing Q2 Results

By a GenomeWeb staff reporter

NEW YORK (GenomeWeb News) – Following disappointing second quarter financial results, a number of Wall Street analysts have lowered their top- and bottom-line estimates for Life Technologies.

On Thursday, Life Tech reported non-GAAP revenues for the second quarter grew 4 percent to $945 million, while EPS came in at $.89, both falling short of consensus Wall Street estimates. Afterward, analysts reacted by cutting their revenue and income estimates and lowering share price targets.

Citgroup's Amit Bhalla lowered 2011 EPS by 3 percent to $3.73 from an earlier forecast of $3.85, and 2012 EPS to $4.10 from $4.23, though he maintained a "Buy" rating. Isaac Ro at Goldman Sachs cut EPS for 2011 to $3.72 from $3.86, though he raised the 2012 EPS estimate to $4.31 from $4.27. He also lowered the 12-month price target on Life Tech's stock to $48 from $52.

In a note, Ro cited concerns about Life Tech's end market uncertainties. In particular he noted that Washington is likely to "freeze NIH budgets until further notice. This complicating factor leaves us wondering if Life Tech has been sufficiently conservative to avoid another revenue shortfall in 4Q," referring to revised guidance from the company for full-year 2011.

Life Tech lowered EPS guidance to a range of $3.70 to $3.80 from an earlier guidance of between $3.80 and $3.95. Constant-currency revenue growth is estimated to be between 3 percent and 5 percent for the second half of 2011, and to fall between 2 percent and 4 percent for full-year 2011.

Jefferies analyst Jon Wood cut his 2011 EPS estimate to $3.70 from $3.87 and 2012 forecast to $4 from $4.20. On an expected lower cash-flow forecast, he also reduced his price target on the firm's stock to $58 from $63. He has a "Buy" rating on the company.

For 2012 Life Tech initially forecast net income growth of 10 percent year over year on mid-single digit organic revenue growth. In a note, Wood forecast 8 percent net income growth for 2012 "reflecting a more draconian outlook for NIH budget levels."

Quintin Lai at RW Baird lowered his 2011 EPS estimate to $3.73 from $3.85, and net sales estimate to $3.77 billion from $3.86 billon. His price target was cut to $59 from $70, but he maintained an Outperform rating on the company.

David Ferreiro at Oppenheimer also kept an Outperform rating but lowered 2011 EPS to $3.68 from $3.85. His revenue estimate for Life Tech is now at $3.69 billion for 2011, down from an earlier forecast of $3.81 billion.

However, "[d]espite our draconian forecast, we continue to see considerable value in Life Tech's shares," he wrote in a research note, and especially noted the company's Ion Torrent business.

"[I]f anything, 2Q results reinforce our belief that the Ion Torrent will be an extremely successful product and drive long-term growth," he said. Ion Torrent sales contributed about $13 million to Life Tech during the quarter, which Ferreiro said "implies" about 240 system placements. He forecast 650 additional system placements in the second half of 2011.

In early Friday trade on the Nasdaq, shares of Life Technologies were down 2 percent at $44.89.

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