Foolish Forecast: Bloody Good Showing for Immucor

Blood-testing company Immucor (Nasdaq: BLUD  ) will file second-quarter 2007 earnings on Wednesday, Jan. 3, and investors have every reason to be sanguine about the results.

What analysts say:

  • Buy, sell, or waffle? The four analysts covering Immucor are evenly split on whether to buy or hold, with two saying sit tight and one each recommending the company as a buy or strong buy.
  • Revenues. For the second quarter, revenues are expected to flow 16% higher to $51.4 million, up from the $44 million recorded a year ago.
  • Earnings. Profits are expected to jump a heart-thumping 38% over last year, to $0.18 per share.

What management says:
Market leaders are often able to generate extra profits from even modest sales growth simply by raising prices. Immucor has shown that it fits that bill as it has been able to increase prices for both equipment and reagents to test the blood across the board. In the first quarter, Immucor saw sales rise 20%, but the cost of making those sales rose less than 5% from the prior period. That translated into gross margins of 67.6%, up from the 63.9% in margins in 2005. Says Dr. Gioacchino DeChirico, Immucor's president and CEO, "We remain on track to increase gross margin to over 70% by the first quarter of fiscal 2009."

What management does:
The impressive growth in margins, while showing the pricing power that Immucor commands in the marketplace, has also been leading to impressive growth in its efficiency in generating returns for investors. With more than $69 million in cash on its balance sheet, up from $37 million last year and nearly 30% more than just last quarter, its ability to continuously pump more cash flow out of its operations means it has a better than average chance of self-financing its growth and managing its profits.

Margin %

08/05

11/05

02/06

05/06

08/06

Gross

61.6

63.6

64.9

66.2

67.4

Op.

26.8

30.2

33.8

35.8

38.6

Net

17.4

18.5

20.5

21.7

23.2



Efficiency Ratios

08/05

11/05

02/06

05/06

08/06

ROA

17.3

21.5

23.7

23.5

24.1

ROE

24.9

28.2

30.0

30.5

32.0

ROC

22.2

27.5

29.7

30.4

32.5

All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ended in the named months.

One Fool says:
The stock has doubled over the past year as Immucor is in a go-go growth stage right now. But it's trading at 38 times projected 2007 earnings, a bit pricey considering others in its industry are trading in the low 20's right now. Yet it's been hard to go wrong betting with this winner as it has consistently bested its guidance and has even bought back shares to help ameliorate dilution for shareholders. But it seems priced to perfection and any stumbles, even if they seem remote at this point, could send the stock down. It's happened before to Immucor as its sale cycle is often difficult to predict and margins haven't always grown in the nice upward trajectory they're currently in. However, in such a situation, I would say it would be enough to get my blood racing to consider buying shares.

Competitors:

  • Beckman Coulter (NYSE: BEC  )
  • Dade Behring (Nasdaq: DADE  )
  • Thermo Fisher Scientific (NYSE: TMO  )

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Fool contributor Rich Duprey does not own any of the stocks mentioned in this article. You can see his holdings here. The Motley Fool has a disclosure policy.


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