ILMN Illumina Inc

Recently, we reaffirmed our Neutral recommendation on Life Technologies (LIFE) with a target price of $41.00.

Life Technologies reported an EPS of 89 cents in the second quarter of fiscal 2011, missing the Zacks Consensus Estimate by 5 cents and 2 cents lower than the year-ago quarter.

Revenues increased 4% year over year to $945 million, missing the Zacks Consensus Estimate of $961 million. Excluding the impact of foreign exchange movement, revenue growth for the quarter was 3%. On a geographical basis, revenue growth was witnessed across all regions: Europe 2%, Asia-Pacific 3%, the Americas 3% and Japan 8%.

However, the reported quarter was disappointing due to tighter budgets for academic and government-funded research in both the US and Europe, delays in the launch of the 5500 Genetic Analyzer in Japan due to the earthquake and temporary slack in business in China.

In order to drive growth in emerging markets, the company adopts strategies such as investment in infrastructure, increasing sales force and maximizing eCommerce capability. The company has opened the India Distribution Center (IDC) in Bangalore to cater to customer demand in the South Asian Region.

These strategies coupled with continuous investments in AsiaPacific and Latin America should enable the company to capture the immense potential of these fast-growing regions. Although business in China witnessed some slackness during the reported quarter, the company is confident of higher growth over the next few quarters.

Life Technologies continues to experience lower demand from academic and government-funded researchers in the US and Europe. Although the company does not expect the funding situation to worsen, it has adopted a cautious stand and expects soft demand in both the US and Europe government-funded research for the rest of 2011. To ease the impact of this scenario on the bottom lime, Life Technologies has taken the cost structure optimization route to boost efficiency.

The company is stepping up a number of cost savings initiatives that were originally planned to begin later in 2011, so that it emerges stronger in 2012. These initiatives are expected to result in margin expansion gradually based on which Life Technologies expects to record mid-single- digit revenue growth and double-digit earnings growth in 2012.

Although the global economic condition is improving gradually, any hiccup in the recovery process could act as a deterrent. Moreover, Life Technologies faces tough competition from players such as Thermo Fisher Scientific (TMO) and Illumina (ILMN) among others.

 
ILLUMINA INC (ILMN): Free Stock Analysis Report
 
LIFE TECHNOLOGS (LIFE): Free Stock Analysis Report
 
THERMO FISHER (TMO): Free Stock Analysis Report
 
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