Cepheid (CPHD) Turns it Around with Q1 Earnings; Guides Up - Analyst Blog
Zacks Equity Research
Updated
Cepheid CPHD reported adjusted earnings (considering stock-based compensation expense as a regular spending) per share (EPS) of 6 cents in the first quarter of 2015, which compared favorably with the Zacks Consensus Estimate of a loss of 17 cents. The bottom line also showed a marked improvement from the year-ago quarter's adjusted loss of 10 cents. The year-over-year upside was primarily driven by higher revenues, stronger margins and lower expenses.
Including one-time items, the company reported earnings per share of a penny; representing a significant improvement from the year-ago quarter’s reported loss of 13 cents per share.
Cepheid - Earnings Surprise | FindTheCompany
Revenues in Detail
Cepheid experienced solid 24.1% year-over-year growth in revenues of $132.6 million in the first quarter. The top line also outpaced the Zacks Consensus Estimate of $125 million and exceeded the company's guidance of $123–$126 million.
The year-over-year top-line growth is primarily attributable to the strong performance of the company's Commercial Clinical business, which delivered record growth of 33%. Overall, strong execution on the company’s test menu, geographic expansion and market extension programs were responsible for its impressive first quarter revenue performance.
Segments in Detail
Revenues from the Clinical segment, which were up 24.8% year over year to $125.3 million, contributed approximately 94.5% to total revenue in the first quarter of 2015. For the full year, Cepheid now expects Commercial Clinical revenues (which drive the clinical segment as a whole) in the range of $430–$438 million, representing annualized growth of 21–23% (up from the earlier guided $426–$438 million, annualized growth of 20–23%).
Cepheid's Non-Clinical & Other business revenues improved 12.3% year over year to $7.3 million. The company now expects non-Clinical business revenues to reach approximately $22 million in 2015 (up from the previous guidance of $17 million).
During the reported quarter, Cepheid installed 163 GeneXpert systems in its commercial Clinical business and another 133 GeneXpert systems as part of its HBDC program. The total count of GeneXpert systems placed worldwide scaled 8,321 as of Mar 31, 2015.
Operational Update
Cepheid's adjusted gross margin improved an impressive 400 basis points (bps) year over year to 54.6% in the first quarter. This reflects the benefits that the company gained from a mix containing lesser HBDC and fewer Infinity systems. Adjusted cost of goods sold climbed 13.8% to $60.2 million.
In the reported quarter, adjusted operating expenses amounted to $65.2 million, up 11.5% year over year. Nevertheless, adjusted operating income at Cepheid was $7.3 million, a massive turnaround from the prior-year quarter's adjusted operating loss of $4.4 million.
Financial Position
Cepheid exited the quarter with cash and cash equivalents and short-term investments of $310.5 million compared with $293.4 million as on Dec 31, 2014. As of Mar 31, 2015, Cepheid generated $0.7 million in cash flow from operating activities compared to cash outflow of $16.9 million in the prior-year quarter. Capital expenditure declined 14% year over year to $10 million.
Outlook
Cepheid has revised its financial guidance for 2015. The company now expects total revenue in the range of $542 million to $553 million, reflecting annualized growth of 15% to 18%, (as against the prior range of $538–$553 million). The current 2015 Zacks Consensus Estimate of revenues for 2015 of $547 million lies within the company’s guided range.
On the bottom-line front, Cepheid now expects earnings of 25–29 cents per share (as against the previous projection of a loss of 51–55 cents per share). The current Zacks Consensus Estimate for the year is pegged at a loss of 52 cents, much lower than the guided band.
Cepheid also provided its guidance for the second quarter of 2015. The company expects total revenue in the range of $128–$131 million and a loss per share of 5–6 cents for the period. The Zacks Consensus Estimate for second-quarter revenues of $131 million coincides with the upper limit of the company's projection. The same for EPS is pegged at a loss of 14 cents, higher than the estimated range.
Our Take
We are impressed with Cepheid's better-than-expected first-quarter 2015 results. Interestingly, Cepheid’s Non-Clinical business returned to positive top-line growth this quarter, driven by better-than-expected bio-threat and research grant revenues, which has been witnessing deteriorating sales over the past few quarters.
Management was pleased to announce that Cepheid’s Xpert bladder cancer test, which awaits its commercial release in the international market in late 2015 or early 2016, has recently exhibited impressive performance in detecting this low-grade cancer.
Briefly, Cepheid continues to make good progress on its system and test menu expansion initiatives. In the last 12 months alone, Cepheid has added 8 tests to its Xpert CE IVD menu, including the milestone HIV Viral Load, HIV Qualitative and HCV Viral Load tests. We believe the company’s strong pipeline of critical test menu will facilitate its growth further in the diagnostics market.
Zacks Rank
Currently, Cepheid carries a Zacks Rank #1 (Strong Buy).
Some other well-ranked medical instrument stocks are Inogen, Inc. INGN, RTI Surgical Inc. RTIX) and ABIOMED, Inc. ABMD. While Inogen and RTI Surgical sport a Zacks Rank #1 (Strong Buy), ABIOMED holds a Zacks Rank #2 (Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
