Quick -- what's the fastest way to sink shares of a company's stock? Missing analyst estimates and then lowering forward guidance, of course. Shares of LifeCell
The quarter actually wasn't that bad for LifeCell. Product revenue was up significantly to $35 million; gross margins were strong at 70%, up from 65% in the third quarter of last year; and net margins were up sharply to a respectable 14.4%.
|
Revenue* |
Y-O-Y Growth |
Net Margins |
|
|---|---|---|---|
|
Q3 06 |
$35.1 |
45% |
14.4% |
|
Q2 06 |
$36.1 |
59% |
14.1% |
|
Q1 06 |
$30.7 |
54% |
13.3% |
|
Q4 05 |
$27.3 |
64% |
14.0% |
The problems for LifeCell came because analysts were expecting it to earn $0.16 a share, or $5.1 million for the quarter, and the company made only $0.15 a share. But that number was still up 50% compared with a year ago, so it's hard to see what the big deal was here.
The more likely reason for today's sharp decline in shares was that LifeCell guided for fourth-quarter revenue to be $36 million to $38 million, which is up at least 33% over last year, but signals that its sales growth is slowing down. LifeCell also lowered earnings guidance for 2006 to $0.57-$0.59 a share from its previously announced $0.59-$0.63 per share. This is still more than 50% higher than the $0.36 a share the company earned in 2005, but LifeCell has a lot of earnings growth baked into the stock; it was trading at nearly 60 times 2006 earnings before today's downturn.
LifeCell's products are scientifically cutting-edge, and the idea of using someone else's skin to help repair injuries is admittedly pretty cool. Sadly, that's not enough to make up for an overvalued stock, and that's exactly was LifeCell's shares were -- before today, at least. LifeCell needs sales growth or a pickup in margins if it doesn't want more days like this one.
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Fool contributor Brian Lawler does not own shares of any company mentioned in this article. The Fool has a disclosure policy.
