Techne Downgraded to Sell - Analyst Blog

On Mar 18, Zacks Investment Research downgraded Techne Corp. TECH to a Zacks Rank #4 (Sell).

Why the Downgrade?

Techne witnessed sharp downward estimate revisions after reporting its second-quarter fiscal 2014 (ended Dec 31, 2013) results on Feb 4. Adjusted earnings per share of this MN-based manufacturer of biotechnology and clinical controls products increased 2.4% year over year to 75 cents. However, the results missed the Zacks Consensus Estimate by 5 cents.

On a geographic region basis, sales in Europe, excluding the impact of currency fluctuations, fell 2% as against organic growth of 1.5% witnessed in the previous quarter. On the other hand, European academic sales went down slightly during the second quarter due to relatively flat sales to biotech and pharma customers.

Sales to U.S. academic customers also decreased 4.6% in the quarter. This decline reflects the fact that Techne's customers are facing stressful conditions in the U.S. academic market. This segment is now down to 12% of the company's consolidated Biotech segment sales.

After considering costs realized upon sale of acquired inventory and amortization of intangible assets, adjusted gross margin dropped 350 basis points to 72.7% in the quarter, due to a change in product mix from higher margin Biotechnology segment sales to Clinical Controls segment sales because of the Bionostics acquisition.  

The Zacks Consensus Estimate for 2014 earnings decreased 3.2% to $3.31 per share over the last 60 days. For 2015 as well, most of the estimates were revised downward over the same period, causing the Zacks Consensus Estimate to drop by 3.1% to $3.48.

Other Stocks to Consider

In the Medical Instruments space, Cynosure, Inc. CYNO, Syneron Medical Ltd. ELOS and Cyberonics Inc. CYBX are performing well. While Cynosure and Syneron sport a Zacks Rank #1 (Strong Buy), Cyberonics holds a Zacks Rank #2 (Buy).