Qiagen’s ( QGEN - Snapshot Report ) first quarter 2012 earnings of 12 cents per share remained flat on a year-over-year basis. However, adjusting for certain one-time items, EPS came in at 23 cents in the first quarter, beating the Zacks Consensus Estimate of 19 cents as well as the year-ago quarter earnings by a couple of cents. The improvement in the bottom line was driven by double–digit sales growth and efficient cost management.

In the fourth quarter, all the operational regions of the company delivered double-digit growth at CER. Region wise, Americas (47% of revenues) witnessed a 15% increase in sales at CER, driven by strong contributions from the US, Brazil and Canada. However, revenues from Europe- Middle East-Africa (34% of sales) and Asia-Pacific /Japan (18% of sales) increased 12% and 18% at CER, respectively. Europe benefited from continued growth in Germany, France, Italy and the Nordic region, offset by weaker sales from southern Europe. The growth in Asia-Pacific /Japan was on the heels of greater contribution from Japan in the quarter that suffered from tsunami and nuclear reactor disasters in the year-ago period.

Under the product categories, Consumables and related revenues (accounting for 88% of net sales in the quarter) rose a robust 14% year over year at CER, while instrumentation revenues (accounting for the rest) increased by 5% at CER. Sluggish instrument sales during the quarter were impacted by greater contribution from Applied Testing and Pharma, which were more than offset by significantly lower sales from Molecular Diagnostics and Academia.

Qiagen exited the first quarter with cash and cash equivalent and short-term investment of $275.3 million compared with $275.7 million at the end of fiscal 2011.

Segments

Qiagen primarily derives its revenues from molecular diagnostics, applied testing, pharma and academia, which represented 47%, 7%, 20% and 26% of total sales, respectively, during the quarter. Molecular diagnostics sales registered a 21% increase at CER. Continued growth in Personalized Healthcare, on the back of demand for companion diagnostic tests as well as higher milestone payments for co-development projects with pharmaceutical companies contributed to the growth in this segment. Moreover, the addition of Ipsogen's blood cancer testing portfolio in July last year provided a significant boost.

Sales derived from applied testing were up 23% at CER, primarily driven by strong demand for human identification and forensic products in the Americas and Europe. Additionally, contributions from veterinary testing and food safety products contributed to the growth.

Pharma sales rose 10% at CER based on demand for the GeneGlobe portfolio of molecular pathway analysis products. Academia witnessed mere a 3% upside in net sales, affected by lower instrument sales due to the ongoing adverse impact of budget uncertainty and austerity measures in the US and some European countries.

Qiagen exited the first quarter with cash and cash equivalent and short-term investment of $275.3 million compared with $275.7 million at the end of fiscal 2011.

Outlook

Qiagen reiterated its 2012 outlook. For the full year, net sales are expected to increase in the range of 6-8% CER on the back of mix of organic growth and contributions from the Cellestis and Ipsogen acquisitions in 2011. Foreign exchange rates are expected to adversely impact sales in 2012. For 2012, adjusted EPS is expected to be in the range $1.03 - $1.05.

The company provided its second quarter 2012 EPS guidance of 24 cents (higher than the current Zacks Consensus Estimate of 23 cents) on revenue growth of 10-11% at CER. The Zacks Consensus revenue Estimate of $285 million for the second quarter of 2012 is short of the projected growth rate.

Recommendation

Companion diagnostics is currently gaining significant traction and peers of Qiagen like Myriad Genetics ( MYGN - Analyst Report ) are emerging as strong players in the companion diagnostic market. However, Qiagen is adopting an aggressive acquisition strategy to widen its scope and strengthen its position in the competitive landscape compared to other major players like Life Technologies ( LIFE - Analyst Report ) and Sigma-Aldrich ( SIAL - Analyst Report ) .

Qiagen currently retains a short-term Zacks #3 (Hold) Rank, which also reflects our ‘Neutral’ recommendation on the stock over the long term.