Immucor Inc. (BLUD) reported an EPS of 30 cents for the fourth quarter of 2010 (ending in May 2010), surpassing the Zacks Consensus Estimate by a penny and the year ago quarter by 3 cents. For the full year 2010, the company reported an EPS of $1.17, 8.5% higher than the previous year.
Immucor reported $82.9 million in revenues, an increase of 5% from $79.0 million in the year-ago period. However, revenues were lower than the Zacks Consensus Estimate of $84 million. Foreign exchange fluctuations had a positive impact of $0.8 million on revenues during the quarter. During 2010, the company reported revenues of $329.1 million, up 9% compared with 2009.
Immucor’s gross margin improved 270 basis points year over year to 72.6%. The previous quarter included expenses of $1.8 million related to the company’s Quality Process Improvement Project, targeted at establishing a better quality system. As expected, subsequent to the completion of the project in the third quarter of fiscal 2009, margins have improved. This is because future costs aimed at quality improvement will not have a material impact on the company’s financials.
Operating expenses increased 14.5% year over year to $28.6 million primarily due to an increase in research and development and general and administrative costs.
Immucor’s main products – traditional reagents, capture reagents and instruments – accounted for 62%, 25% and 13%, respectively, of total revenues. Although Immucor earns the most from the manufacture of traditional reagents, its gross margin used to be lower than capture reagents. However, this trend has changed during the latest quarter, with traditional reagents recording higher margin (81%; 75.3% in fourth quarter 2009) compared to capture reagents (80.9%; 84.1% in fourth quarter 2009).
While traditional reagent revenues declined 2% ($51.12 million) from the year-ago period, revenues from capture reagents ($20.6 million) and instruments segments ($10.1 million) increased 21% and 11%, respectively.
We are pleased to note that Immucor’s fourth generation automated instrument, Neo, has received approval from the US Food and Drug Administration (FDA) in April 2010. Neo was launched in Europe in February 2010 and has received approval in Japan as well. The instrument recorded 18 orders during the quarter.
Immucor’s flagship product, Galileo, is specifically targeted at large hospitals. However, the instrument, launched in Western Europe in 2002 and in the US in 2004, is approaching its natural replacement cycle of 5−7 years. Its orders are also on a declining trend – from 13 orders in the third quarter of 2010 to only 2 during the fourth quarter. Neo, targeted at large hospitals, donor centers and reference laboratories, will replace Galileo in due course. Immucor’s Echo recorded 60 orders during the quarter.
Immucor exited fiscal 2010 with $202.6 million in cash, up from $136.5 million recorded at the end of fiscal 2009.
Outlook
Immucor has reiterated its guidance for 2011. The company expects revenues and EPS of $345−$355 million and $1.23−$1.29, respectively. Gross margin is expected to be in the range of 70.5% to 71.5%.
We believe Immucor’s portfolio of a large test menu along with various instruments can cater to different testing volume demands of blood banks, hospitals and clinical laboratories. We are currently Neutral on the stock.
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