Why Cepheid Shares Are Climbing

Is this meaningful or just another movement?

Jan 31, 2014 at 3:18PM

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Cepheid (NASDAQ:CPHD) have gained 14% today after the company bested analyst expectations on both top and bottom lines for its fiscal fourth quarter.

So what: Cepheid had been expected to post revenue of $102.2 million and a loss of $0.11 per share for the quarter; instead, the molecular diagnostics company trounced both estimates by reporting a 22% year-over-year gain in revenue to $113.3 million and adjusted earnings of $0.03 per share. The company's generally accepted accounting principles net loss was $0.15 per share for the quarter, but $0.06 of that was the result of a one-time restructuring charge. Cepheid's full-year guidance also impressed the Street by coming in ahead of expectations.

Now what: Cepheid now expects full-year revenue for 2014 in the range of $446 million-$461 million range, while adjusted EPS is expected to fall between $0.24 and $0.29 per share. The company also expects a GAAP net loss of between $0.26 and $0.21 per share for the year, but the adjusted number is what analysts were looking at most closely, and it compares quite favorably to the $0.01 EPS consensus.

The company's top line is certainly growing -- its 2014 guidance midpoint is 13% higher than 2013's full-year revenue of $401.3 million -- but it hasn't proven that it can be profitable without accounting tricks. In addition, its annual free cash flow loss of $32.5 million was much worse than its annual net loss of $18 million. It's also worth pointing out that the midpoint of revenue guidance predicts a lower growth rate than 2013's 17% growth rate from 2012. There's a lot of hope and hype around Cepheid right now, but the numbers don't seem to support its valuation. I'd hang back for the time being.

Want more news and updates? Add Cepheid to your Watchlist now.

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