LIFE Beats, Outlook Positive - Analyst Blog

Life Technologies Corporation (LIFE) reported fourth quarter earnings of 80 cents per share, well above the Zacks Consensus Estimate of 72 cents. The company reported earnings of 82 cents in the year-ago period. For the full year, Life reported earnings of $3.04, beating the Zacks Consensus Estimate of $2.96. Full year results were better than the year-ago earnings of $2.85. 

Strong growth in Europe, Asia-Pacific, the Americas and Japan helped fourth quarter revenues increase 14% to $874 million. Excluding the impact of currency and the divested Lab Information Management Software (LIMS) business, revenues grew 11%. Full year revenues increased 5% to $3.3 billion. 

All revenue segments at Life recorded an increase in sales during the fourth quarter. The Molecular Biology Systems division recorded a 19% increase in fourth quarter revenues, which came in at $422 million. Revenues were driven by demand across the portfolio, including continued strong orders for the company’s Influenza A (H1N1)-related products, which contributed $45 million to 2009 revenues. Full year revenues for this segment increased 7% to $1.58 billion. 

Double-digit growth for consumable kits and capillary electrophoresis instruments sold into applied markets like forensics and environmental testing, and continued innovation of the SOLiD platform helped boost Genetic Systems revenues, which increased 16% to $234 million during the reported quarter. For the full year, revenues increased 8% to $907 million. 

Meanwhile, we were pleased to see an improvement in Cell Systems division revenues which increased 6% to $211 million in the fourth quarter. New product launches, strong price realization across business units and strong demand from academic and government customer helped offset weakness in sales to pharmaceutical and biotechnology customers. Full year revenues remained flat at $789 million. 

The Mass Spectrometry division, which is Life’s joint venture with MDS Analytical Technologies, contributed $16 million in other income during the quarter. Life entered into an agreement in Sept. 2009 under which it will be selling its share in this joint venture to Danaher Corporation (DHR) for $450 million. In our view, the sale of this business will allow Life to focus on the high growth molecular and genomics markets. The deal is expected to close shortly. 

Fourth quarter gross margin improved 130 basis points (bps) to 65%, mainly due to the favorable impact of positive price realization across the portfolio, positive currency impact, lower royalty expense and reduced costs as a result of merger synergies, which were partially offset by lower royalty revenues. Full year gross margins improved 70 bps to 66.3%. 

Improved gross margins, lower operating expenses as result of synergy realization and other cost reductions helped increase fourth quarter operating margins by 300 bps to 25.8%. Full year operating margin increased 300 bps to 26.6%. 

Life exited the year with $648 million in cash and short-term investments, including $41 million held as restricted cash. Following the release of strong fourth-quarter and fiscal 2009 results, Life provided guidance for fiscal 2010. 

Life expects earnings per share in the range of $3.30 - $3.50 on mid-to-high-single digit organic revenue growth. The current Zacks Consensus Estimate for fiscal 2010 is $3.33. The stock was up approximately 7.31% in pre-market trading. 

We believe strong performance of the core business and new product launches will help drive revenues going forward. Meanwhile, lower expenses and cost cutting along with increased revenues should help drive the bottom-line. We currently have a Neutral recommendation on Life.
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