Luminex Corporation LMNX is gaining momentum on the back of Aries Platform’s solid prospects and a slew of other developments. However, intensely competitive industry is worrisome.
In a year’s time, shares of Luminex have gained 11.7% compared with the industry's 1.5% growth. The current level also compares favorably with the S&P 500 index’s 7.6% decline. The stock carries a Zacks Rank #3 (Hold).
Here we take a quick look at the major headwinds that are plaguing Luminex and discuss the factors that ensure near-term recovery.
What’s Deterring the Stock?
Luminex operates in the highly competitive life sciences industry. Notably, the industry is characterized by rapid and continuous technological innovation. In the respiratory market, it is currently facing stiff competition from other industry biggies.
Luminex performed disappointingly in the third quarter of 2018, wherein earnings and revenues dropped on a year-over-year basis. Per management, the departure of LabCorp affected the results as well as Luminex’s molecular diagnostic revenues. Luminex’s MDx franchise revenues and assay revenues also declined year over year in the same period. Management expects MDx revenues and consumable revenues to be soft in 2018.
Moreover, Luminex’s flagship VERIGENE products underperformed in Japan due to reimbursement challenges.
Why Should You Retain the Stock?
The Aries Platform: Luminex is making remarkable progress with the ARIES system, which represents a major revenue opportunity for the company. On a year-over-year basis, utilization per ARIES customer grew 28% to $55,000 in the third quarter of 2018.
MilliporeSigma Buyout: In a bid to enhance the portfolio of flow-based detection, Luminex announced the acquisition of MilliporeSigma's flow cytometry portfolio earlier this month. The deal, announced earlier in October 2018, has a net worth of $75 million in combined stock, asset and inventory purchases. The buyout is expected to contribute $40-$50 million to revenues in 2019. It will expand Luminex’s direct interactions with researchers conducting cellular analysis as well. Luminex will also leverage on MilliporeSigma's flow cytometry portfolio’s exclusive solutions like Amnis and the Guava.
Impressive Market Trends: Luminex is a leading player in the molecular diagnostics space. The company offers more than 15,000 products encompassing 16 different categories. Markedly, the categories include Recombinant Proteins, GMP Proteins, Antibodies, ELISAs, Luminex Assays and High-Performance Assays, Stem Cell Products, Cell Culture, Small Molecules & Peptides and more.
Internationally, data from Markets and Markets reveal that the molecular diagnostics market is estimated to grow at a CAGR of 9.3% to reach $9,333.8 million by 2020. Such market trends can also prove accretive for Luminex.
Luminex anticipates fourth-quarter 2018 revenues within $77-$79 million. For 2018, the company expects revenues within $310-$316 million.
Which Way Are Estimates Treading?
For the fourth quarter, the Zacks Consensus Estimate for earnings is pegged at 11 cents, reflecting a year-over-year decrease of 35.3%. The same for revenues stands at $77.9 million, down 0.4% from the previous year.
For 2018, the Zacks Consensus Estimate for revenues is pinned at $312.6 million. The same for earnings stands at 55 cents, mirroring 39.6% decline year over year.
Luminex Corporation Price and Consensus
Luminex Corporation Price and Consensus | Luminex Corporation Quote
A few better-ranked stocks in the broader medical space are Veeva Systems Inc VEEV, Penumbra, Inc. PEN and OPKO Health, Inc OPK, each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Veeva Systems’ long-term earnings growth rate is projected at 19.5%.
Penumbra has a long-term earnings growth rate of 20%.
OPKO Health’s long-term earnings growth rate is projected at 12%.
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