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On Feb 4, Zacks Investment Research downgraded Cepheid (CPHD - Analyst Report) to a Zacks Rank #5 (Strong Sell).

Why the Downgrade?

On Jan 30, Cepheid reported fourth-quarter 2013 adjusted loss of 8 cents per share, narrower than the Zacks Consensus Estimate of a loss of 10 cents per share. The adjusted loss excludes restructuring expenses including impairment of certain assets and amortization of acquired intangible assets (considering stock-based compensation as regular expense).  

For full-year 2014, Cepheid expects net loss in the range of 21 cents to 26 cents per share. The current Zacks Consensus Estimate for 2014 stands at a loss of 23 cents per share. On the other hand, revenues are expected in the range of $446-$461 million. The Zacks Consensus Estimate for revenues is pegged at $457 million, well within the guidance provided by the company.

Cepheid anticipates a weak capital spending environment given persistent weak macro-economic conditions. Additionally, the austerity measures in Europe are expected to affect the growth prospects particularly in the overseas markets.

A stiff competitive scenario is another cause of concern as other players in the market boast of stronger resources, capitalizing on which they can garner greater market share. This can prove detrimental for Cepheid’s revenues going ahead.

Cepheid has witnessed downward estimate revisions following the announcement of its fourth-quarter results. Three estimates moved down in the past 30 days, while no upward revision was observed over the same time span.

Other Stocks To Consider

Better-ranked stocks in the medical instruments industry include Natus Medical Inc. ((BABY - Snapshot Report)), Cyberonics Inc. ((CYBX - Analyst Report)) and DexCom, Inc. (DXCM - Analyst Report). While Natus Medical sports a Zacks Rank #1 (Strong Buy), Cyberonics and DexCom carry a Zacks Rank #2 (Buy).

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