Affymetrix: Zacks’ Bull of the Day Play

Headquartered in Santa Clara, California, Affymetrix (AFFXAnalyst Report) is a leading provider of microarray-based products and services to the global research community. The company utilizes its DNA chip technology in areas of gene expression, analysis, and clinical application to help treat infectious diseases, cancer, and other ailments.

Affymetrix has 1,100 employees globally, manufacturing facilities in Ohio, California, Singapore and  Austria, and a sales and distribution network across U.S., Latin America, Europe and Asia.

The company has two reportable operating segments: Affymetrix Core (72.2% of revenues in H1 2014) and eBioscience (27.4%).

Solid Third Quarter Results

AFFX reported its Q3 results on October 30. Total revenues increased by 8.4% to $87.1 million ahead of the Zacks Consensus Estimate of $84 million. The positive surprise was driven mainly by strength in the company’s product portfolio and increased focus on high-growth markets.

Adjusted earnings for the quarter were $0.08 per share, compared to $0.05 per share in the previous year quarter and substantially ahead of the Zacks Consensus Estimate of $0.04 per share.

The company also upgraded its previously announced revenue and EBITDA guidance for FY 2014.They now expect to generate annual revenues of $345 million and adjusted EBITDA of approximately 17% of revenue.

Positive Earnings Estimates Revisions

After better than expected results and upgraded guidance, analysts have started to revise their earnings estimates for the company.

Zacks Consensus Estimates for the current year and the next year are now $0.25 per share and $0.27 per share respectively, up from $0.18 per share and $0.20 per share, 7 days ago. Rising estimates sent the stock back to Zacks Rank #1 (Strong Buy).

The company has delivered positive earnings surprises in three out of last four quarters, with an average quarterly surprise of 53%. In fact, in the last eight quarters, it has missed only once.

The Bottom Line

The company’s strategy to diversify its revenues and focus on high growth markets appears to be finally paying off as evident from the excellent results.

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