Friday, February 02, 2007

Color on quarter: Millipore (NYSE:MIL)

Couple of interesting comments on Millipore (NYSE:MIL) after the co released strong results and guidance last night. Please note that this color is requested by a long-time reader of NC:

* UBS previewed MIL on Jan 22 saying that while they expected the core MIL business to have a strong finish to 2006, lingering issues at Serologicals could limit upside. Firm also noted that on the 3Q conference call, management did not back earlier 2007 (first given in April when the Serologicals deal was announced) EPS guidance of $3.60-3.75 (ex-options; or an estimated $3.40-3.55 with options) as they evaluated the Serologicals forecast "from the bottom up". In response, the Street cut its estimates such that the current 2007 consensus stands at $3.33. Based on management comments at a competitor's conference, the company appeared to the Serologicals issues under control and the integration remained on-track. That said, the firm was looking for 2007 EPS guidance in the range of $3.30-3.45. However, they noted that if management were to reiterate their prior forecast, they would expect MIL shares to move up sharply as they believed many potential investors remain on the sideline ahead of the call.


- UBS notes Millipore reported 4Q06 revenues of $383M, above both the firm and Street estimate of $365M. Excluding the +4% FX impact and $93M in Serologicals, 4Q06 total revenues grew at 9% organically, in-line with their 7-8% estimate. Millipore's core businesses - Bioprocess and Bioscience - recorded a solid quarter, growing at 12% and 7% organically Y/Y.

Firm ups their 12-month price target on MIL shares to $85 from $80. MIL shares are currently trading at 20x 2007 and 17x 2008 estimates versus 22x and 19x for the life sciences group average. Since the acquisition of Serological, MIL shares have traded at a discount due in part to concerns
Serologicals would drag on the top-line and hurt margin expansion. In their view, MIL's 4Q results and better than expected 2007 guidance helps alleviate many of these concerns and as a result they believe MIL's multiple can expand. UBS expects MIL shares to be up +5% in response.

- Merrill Lynch notes Millipore delivered a solid 4Q06 and provided above-consensus guidance for 2007. On the back of these results, they are raising their 2007E EPS from $3.34 to $3.42 and reiterating Buy recommendation. MIL is a leader in a fast growing industry and a derivative play on biotech drug discovery and production. Firm thinks the co's growth opportunities, strong management team, recent acquisitions, and attractive valuation continue to create a compelling investment opportunity.

Critically, management reaffirmed the 2007 guidance that it had originally given back in April, 2006. Consensus expectations had come down below this range and ML thinks investors were expecting management to lower its 2007 guidance on the call; its affirmation should be well received. In addition, management stated that the integration of Serologicals was on track and should be complete by 2Q07.

Notablecalls: First of all, please note that NC does not usually do requests. Calls sent to NC email will of course be considered and some may indeed end up on the page. The situation in MIL looks interesting as management reiterated 2007 guidance, assuring investors business continues to flow as expected. This kind of stability is considered important in a space notorious for it's lumpiness.

MIL has a tendency to move up even following a sizable gap-up, so I would be on a lookout for some follow-through.

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