Zacks Bull of the Day: Affymetrix

After reporting its first profit in two years, it looks like the restructuring plan at this biogenetics company is finally working.

By Zacks.com Sep 3, 2013 4:33PM

Droplet Falling from Pipette into Test Tube (c) Andrew Douglas, Radius Images, Getty ImagesBy Neena Mishra

 

After an unexpectedly strong second quarter, earnings estimates have been rising for Affymetrix (AFFX), sending the stock to Zacks Rank #1 (Strong Buy) with an "Outperform" recommendation.

 
About the company
Headquartered in Santa Clara, Calif., Affymetrix 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 and has a sales and distribution network across the U.S., Latin America, Europe and Asia.
 

Reports a profit after two years
On July 31, 2013, the company reported its second-quarter operating results. The quarter resulted in net income of $2.8 million, or $0.04 per diluted share, compared to a net loss of $1.2 million or $0.02 per diluted share in the same quarter of 2012. The results were substantially better than the Zacks Consensus Estimate of a loss of a penny per share. The company reported earnings for the first time since the first quarter of 2011.
 

Thanks to stronger revenue and control of operating expenses, the company generated $10.3 million in cash from operations. Further they also reduced their senior-secured debt by about 25%. As a result, the company ended the quarter with $44 million cash on hand.
 

Turnaround in the results was due to strong growth in the genetic analysis business and improvement in the expression business. The management said business strengthened in North America and Europe while Japan remained soft. It appears that the company's restructuring plan is finally working.
 

Positive revisions
As a result of the surprising turnaround in the operating results, analysts have revised their earnings estimates for the company in the past few weeks. Zacks consensus estimates for the current quarter and the current year now stand at $0.02 per share and $0.08 per share respectively, up from a penny-per-share loss that was forecast for each 60 days ago.
 

The bottom line
AFFX is a Zacks Rank #1 (Strong Buy) stock. The company also earned a longer-term Zacks recommendation of "Outperform" based on its improved prospects. Turnaround in the quarterly results suggests that the worst may now be over for the company.

 
The company has highly innovative products and a number of proprietary intellectual property licenses. It has so far failed to monetize on them, but new initiatives and shift of focus make it an interesting pick at this time.
 

More from Zacks.com:

Tags: AFFX
0Comments

DATA PROVIDERS

Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.

STOCK SCOUTER

StockScouter rates stocks from 1 to 10, with 10 being the best, using a system of advanced mathematics to determine a stock's expected risk and return. Ratings are displayed on a bell curve, meaning there will be fewer ratings of 1 and 10 and far more of 4 through 7.

120
120 rated 1
265
265 rated 2
460
460 rated 3
719
719 rated 4
629
629 rated 5
629
629 rated 6
622
622 rated 7
437
437 rated 8
319
319 rated 9
116
116 rated 10
12345678910

Top Picks

SYMBOLNAMERATING
BBBYBED BATH & BEYOND INC10
FOXATWENTY-FIRST CENTURY FOX Inc CLASS A10
TWXTIME WARNER Inc10
COPCONOCOPHILLIPS9
HDHOME DEPOT Inc9
More

VIDEO ON MSN MONEY

ABOUT

Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.

Contributors include professional investors and journalists affiliated with MSN Money.

Follow us on Twitter @topstocksmsn.