Wednesday, February 14, 2007

Color on quarter: Invitrogen (NASDAQ:IVGN)

Several firms comment on Invitrogen (NASDAQ:IVGN) following better than expected results and guidance issued last night:

- Banc of America notes IVGN reported 4Q06 EPS of $0.88 (excluding charges but including stock option expense of $0.13), significantly ahead of their $0.75 estimate on a marked sequential improvement in revenue and profitability. A lower tax rate added $0.04. Firm is boosting their target price to $72 (from $68) on a higher cash flow outlook.

They view management's 2007 revenue and EPS guidance as appropriately conservative, given the operating challenges it still faces. However, they see significant benefits from excess capital deployment that are not reflected in its forecasts, leaving the potential for EPS upside in

The worst is over. IVGN's ability to show material operational progress in 4Q06 reveals the strength of its core consumables portfolio. With remediation efforts well underway, the distraction from the beleaguered BioReliance unit gone, and achievable financial expectations set, IVGN's shares should surge today on greater confidence in its ability to restore a more acceptable earnings and cash flow growth trajectory.

Maintains Buy.

- UBS notes IVGN showed signs of improvement, and they expect shares to be up in response, but "fuzzy" '07 guidance and linger concerns over execution and mgmt's visibility keep us cautious.

BioDiscovery grew 3% Y/Y, but org growth was flat against tough comps. BioProduction declined 1.0%, due in part to the impact of divestitures (-3%) and weak sera sales (-3.5%). As expected, IVGN announced the sale of the BioReliance for $210M, which should take some pressure off gross margins.

IVGN gave rough '07 guidance of low to mid single-digit sales growth, with non-GAAP EPS growth of "two to three times the rate of sales". IVGN expects 100 bp of operating margin expansion in '07 from the 22.6% level in '06. To reach this target IVGN will have to significantly expand gross margins. USB maintains their '07 EPSe $3.37 and lowers '08 est to $3.85 from $3.95.

Maintains Neutral but ups tgt to $69 from $67.

Notablecalls: Looks like IVGN is starting to show signs of life again. May see a nice move upward today.

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