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Luminex Corporation’s (LMNX - Analyst Report) fourth-quarter 2012 adjusted earnings of 12 cents per share (up 9% year over year) beat the Zacks Consensus Estimate of 10 cents per share. Adjusted earnings exclude one-time charges such as the acquisition-related charges of GenturaDx as well as costs associated with a study.

Profits generated were $4.3 million, up 23.5% from the prior-year quarter due to gross margin expansion.

For the full year, adjusted earnings of 39 cents a share topped the Zacks Consensus Estimate of 31 cents but were lower than the year-ago earnings of 45 cents per share. Profits (as reported) declined 14.5% year over year to $12.4 million (or 30 cents a share).

Revenues

Revenues surged 16% in the reported quarter to $55.5 million, marginally surpassing the Zacks Consensus Estimate of $55 million. Revenues were driven by solid momentum in the assay and consumables businesses. For the fiscal, sales increased 10% year over year to $202.6 million, beating the Zacks Consensus Estimate of $201 million.

For the fourth quarter, Assay sales increased 45% to $23.8 million, led by strong sales in the infectious disease product line.

Revenues from the System segment plunged 31.6% year over year to $7.2 million, mainly due to lesser number of multiplexing systems placed and a transition from the LX system to the MAGPIX system, which has a lower price point. The company shipped 226 multiplexing analyzers during the quarter, resulting in total life-to-date dispatches of 9,659 analyzers, up 2.4% year over year.

On a positive note, Consumable sales increased 23% to $12.4 million. Royalty and All Other revenues grew 5.6% and 22.1% to $7.5 million and $4.7 million, respectively.

Margins

Gross margin in fourth quarter 2012 was 71% versus 67.9% in the prior-year quarter, reflecting a strong mix shift toward higher margin products. Operating expenses were up 12.3% to $32.1 million due to costs associated with the acquisition and integration of GenturaDx. However, operating margin increased to 13.2% from 8.1% in the prior-year quarter.

Selling, general and administrative expenses (as a percentage of sales) remained approximately flat year over year at 36.2%. Research and development expenses were 19.8% compared with 20.7% in the year-ago quarter.

Balance Sheet

Luminex ended fourth quarter 2012 with cash and cash equivalents (including short-term investments) of $56.4 million, down 44% year over year. Long-term debt was $1.7 million, down 34.6%.

Guidance  

Moving ahead, Luminex expects revenues for fiscal 2013 in a range of $220 million to $230 million, up 9%–14% year over year.  The current Zacks Consensus Estimate is pegged at $227 million.

Our View

Luminex possesses an extensive product portfolio and a healthy pipeline of novel assays, which are expected to support growth going ahead. In Jan 2013, the company received the approval from the U.S. Food and Drug Administration (FDA) for its xTAG Gastrointestinal Pathogen Panel (GPP). We believe that the assay will drive long-term growth for the company based on its unique features along with an estimated market opportunity of $150 million.

Moreover, Luminex is developing innovative platforms by combining resources from its latest acquisitions. The company’s initiative to establish a direct sales force for its molecular diagnostics customers will likely improve operating efficiency.

However, Luminex operates in a highly competitive life sciences industry. Sluggish growth in its core markets as well as the ongoing global austerity measures are challenges faced by the company.

The stock carries a Zacks Rank #3 (Hold). Medical instrument companies, such as Cantel Medical Corp. , Abiomed Inc. (ABMD - Analyst Report) and Cyberonics Inc. (CYBX - Analyst Report) with Zacks Rank #1 (Strong Buy), are expected to do well.
 

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