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Luminex (LMNX) Misses Q3 Earnings Estimates, '16 View Up

Zacks Equity Research

Headquartered in Austin, TX, Luminex Corporation LMNX reported third-quarter 2016 adjusted earnings of 6 cents per share, which missed the Zacks Consensus Estimate of 12 cents. In fact, earnings slumped 64.7% on a year-over-year basis.

However, revenues increased almost 17.5% year over year to $71.2 million, well ahead of the Zacks Consensus Estimate of $69 million.

The year-over-year upside may be attributed to impressive consumable sales, healthy broad-based organic growth, strong contribution from Nanosphere, strength in the Assay product portfolio and robust system sales.

Meanwhile, a glimpse at recent market sentiments for the company reveals current dismal trend. Notably, Luminex represents a negative one-year return of 12.4%, way wider than S&P 500’s -0.21% over the same time frame.

Luminex Corporation - Earnings Surprise | FindTheBest

Quarter Highlights

In the quarter, Luminex received an approval from the U.S. FDA for the ARIES Flu A/B & RSV assay. In fact, Luminex received an Emergency Use Authorization (EUA) approval for the xMAP MultiFLEX Zika RNA Assay as well. Per management, Luminex is the only company which addresses both targeted and syndromic testing in laboratories.

On the Aries platform, Luminex has submitted the Group B Strep assay to the U.S. FDA in the quarter. Notably, this will be the third IVD-cleared assay on the Aries system.

Luminex is well poised on the acquisition of Nanosphere -- a well known company in the healthcare economics space with a strong clientele engaged in the development of molecular diagnostic tools. Notably, Nanosphere contributed revenues of $7.4 million in the quarter.

Coming to the upcoming projects of the company, Luminex has commenced a clinical trial for ‘bobotella’ which is scheduled for a FDA submission by the end of 2016 or early 2017. The company also plans to initiate a study for Group A Strep around the end of 2016 or early 2017.

Quarter in Detail

System sales jumped 9.1% on a year-over-year basis to $10.4 million. Notably, the company shipped 294 multiplexing analyzers in the reported quarter that led to higher system revenues. Here we note that system sales included the placements from the ARIES and Verigene System platforms as well.

Assay revenues grew 32% year over year of which 6% was organic. Sales in the infectious disease assay were approximately 78% of total assay sales in the quarter and while genetic testing assays contributed 22%.

Coming to royalty revenues, sales in this segment increased 8% on a year-over-year basis to approximately $11 million. Per management, growth was in line with the expectations of mid to high single-digit growth.

Consumables sales surged 12.5% to $12.3 million, primarily attributable to strong demand across the partner base of the company. Partner revenues grew approximately 10% in the quarter, driven by robust demand for the company’s products in the life science market.

LUMINEX CORP Price, Consensus and EPS Surprise

 

LUMINEX CORP Price, Consensus and EPS Surprise | LUMINEX CORP Quote

Margins

Adjusted gross margin contracted 490 basis points (bps) on a year-over-year basis to 64.1%.

Coming to operating expenses, along with the Nanosphere deal and related costs, expenses soared a massive 30% on a year-over-year basis. However, excluding Nanosphere, operating expenses grew 7% from the year ago quarter.

As a percentage of revenues, SG&A expenses expanded 200 bps to 37.1%. Research and development (R&D) expenses increased 130 bps to 17.9% in the reported quarter.

Balance sheet

Luminex is in a promising financial position with $84 million in cash and no debt at the end of the third quarter.

Guidance

Luminex now expects full-year 2016 revenues in the range of $267–$270 million, up from the previous range of $261–$269 million, reflecting overall growth over 2015 of between 12% and 14%. Notably, management attributes 67% of this growth to the acquisition of Nanosphere.  We note that Nanosphere is expected to add $7.5 million and $8.5 million of revenue in the fourth quarter of this year.

The company expects system revenues to grow 10% in the full year.

Royalty revenues for the year are expected to increase in the mid-single-digit range.

Luminex expects assay revenue for the year to improve in the mid-to high teens and in the mid-single digits excluding ARIES and Nanosphere contributions.

Zacks Rank & Other Key Picks

Currently, Luminex carries a Zacks Rank #2 (Buy).

Other favorably ranked stocks in the broader medical sector are Intuitive Surgical Inc. ISRG, AngioDynamics Inc. ANGO and C.R. Bard BCR.

Notably, Intuitive Surgical and AngioDynamics sport a Zacks Rank #1 (Strong Buy), while C.R. Bard has a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Intuitive Surgical has a long-term expected earnings growth rate of approximately 11.35%. The stock represents an impressive one-year return of approximately 32.9%.

AngioDynamics has a long-term expected earnings growth rate of 15.00%. The company posted a solid one-year return of almost 23.14%.

C.R. Bard recorded a stellar one-year return of almost 15.02%. Notably, the company has an impressive long-term expected growth rate of 11.16%.

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