AACC  Meeting Hangover Begins With Cepheid Earnings Cuts–Stock Off 24% on Volume of 7M shares

Cepheid (CPHD) a leader in molecular diagnostics, forecasted earnings of 38-42 cents a share for the year down from  50-55 cents a share on expected revenues in the range of $333-347M. Revenue for Q2 was $81M an increase of 21% over the 2011 Q2 and Net Income was $1.1M or 2 cents a share and 11 cents a share on a n operating basis. 271 GeneXpert Systems were sold with a cumulative placement of 3350 systems globally. However the outlook was cautious due the usual macro and currency issues as well as concerns about the HBDC (High Burden Developing Country) program revenues. Stockholder equity was $240M with $115M of cash.

Cepheid (CPHD) has not been included in the Raygent Diagnostics and Tools Portfolio because of its high multiple and valuation but now that the stock is down 23% with a Price to Sales ratio of 6.3 it is worth a look after the dust settles. Cepheid remains the premier molecular diagnostics player with a growing menu of infectious disease tests such as MRSA (staph), C.difficile,Chlamydia and Flu with Norovirus (cruise ship GI infection) and oncology tests on the way. In the long term sales growth is expected to the $500M range and would be on any target list of M&A plays due to its technology and growing test menu.

Our tracking composite of diagnostics and tools stocks were red today in sympathy with NASDAQ being off 1.15% and the Cepheid earnings guidance,but volume was light on many stocks. Large cap tools stocks were also weak Agilent (A $37.56), ThermoFisher (TMO $51.86), Waters(WAT $76) all down about 2%+. Danaher (DHR $51.3 ) cut earlier on a strong dollar but damage was light and the stock is up o.4% today.We were hoping Qiagen (QGEN $17) would continue its recovery due to its personalized medicine theme but it also sold off 3% today. Earnings season is here.

Until today the diagnostics and tools stocks in the Rayno Life Science Portfolio have outperformed NASDAQ YTD. Big winners YTD are Abaxis (ABAX), Exact Sciences (EXAS), GenProbe (GPRO), Illumina (ILMN), and NeoGen (NEOG).

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