Meridian Bioscience Slips to Hold - Analyst Blog

On Apr 8, Zacks Investment Research downgraded Meridian Bioscience, Inc. VIVO to a Zacks Rank #3 (Hold) from a Zacks Rank #2 (Buy).

Why the Downgrade?

Meridian reported its first-quarter fiscal 2014 (ended on Dec 31, 2013) results on Jan 22. Adjusted earnings per share of this Ohio-based fully integrated life sciences company decreased 10% year over year to 18 cents. However, Meridian's first-quarter adjusted earnings per share were in line with the Zacks Consensus Estimate.

The combined effect of lower sales, deteriorated gross profit margins and increased operating expenses contributed to this decline in the quarterly earnings. Moreover, the $400 worth of medical device tax that was absent in the comparable period last fiscal, had an adverse effect on the earnings.

Meridian's consolidated revenues declined 1% year over year to $44.8 million during the first quarter of fiscal 2014. This decrease in sales was attributable to lower sales in the company's largest diagnostic focus product family - C. difficile, respiratory product family as well as the Life Science segment's immunoassay component business.

Although the decline in revenues was partially neutralized by increased sales in Meridian's H. pylori focus product family and the Life Science segment's molecular component business, overall sales declined as the positives were outweighed by the negative factors.

In addition, Meridian's operating income dropped 11% to $11.6 million during the quarter. Overall increase in spending on new product development activities combined with addition of field sales force personnel resulted in approximately a $200 hike in personnel related expenses, which in turn, accounted for the decline in operating income. Also, an approximate $500 increase in the company's stock-based compensation negatively affected operating income in this quarter.

The Zacks Consensus Estimate for earnings for fiscal 2014 remained flat at 97 cents per share over the last 60 days. However, for 2015, the Zacks Consensus Estimate dropped 2.8% to $1.06 over the same period.

Other Stocks to Consider

In the Medical Products space, Enzymotec Ltd. ENZY, Covidien plc COV and William Demant Holding A/S (WILYY) are performing well. While Enzymotec holds a Zacks Rank #1 (Strong Buy), Covidien and William Demant retain a Zacks Rank #2 (Buy).