Wednesday, August 26, 2009

Myriad Genetics (MYGN) Home Run Earnings Report; 2010 Guidance Affirmed

I am still a big fan of the business of Myriad Genetics (MYGN) despite last quarter's debacle [Jul 1, 2009: Myriad Genetics Implodes After Hours on Revenue Miss] but as people run into unprofitable $2 biotech stocks in between daytrading Fannie Mae (FNM) or AIG (AIG) it has been ignored. In fact, I'd call it purgatory. But last night's earnings report (and guidance) woke this sleepy stock up, and it's roaring today. In retrospect one can see a beautiful "double bottom" formation on the chart.

More important than the results in my book, was the confirmation of a very large increase in guidance that analyst's had set out: 2009 EPS estimate: $0.85. 2010 EPS estimate: $1.42. Can they actually do it? Who knows - no one is asking questions today. Since people are now justifying buying "early cycle recovery" stocks not on 2009 estimates but 2010 or at times 2011, and placing 60, 80, 100X forward PE ratios on those numbers, Myriad's paltry 20x forward estimates on 2010 (for a company that is actually growing, rather than shrinking to prosperity) means it is 'dirt cheap', at least in the new paradigm (return to 1999 NASDAQ valuations?) stock market.

I am not sure how to attack this stock here with both a huge gap created today, and the stock fighting through the range the huge gap down in early summer created. So we'll keep an eye on it and see how it acts... I'd like to get this stock back into the portfolio now that the pharma business is spun off into it's own entity. The gross margins in the remaining business are incredible at high 80%s, and the company is adding quite a bit of new sales folks (at a cost of course) to continue to drive incremental sales.

Full earnings report here.

Via Reuters
  • Myriad Genetics's (MYGN) fourth-quarter income from continuing operations rose 71 percent and said it was comfortable with the current market estimates for fiscal 2010, sending shares up 7 percent after the bell.
  • During the fourth quarter, molecular diagnostic revenue rose 33 percent to $86.1 million from $64.7 million. The company said revenue growth was moderated during the second half due to recession and it has implemented measures, including adding 50 new sales representatives, to spur sales.
  • For the fourth quarter, income from continuing operations was $36.7 million, or 37 cents a share, compared with $21.5 million, or 23 cents a share, in the year-ago period.
  • In July, the company completed the spin-off of its research and pharmaceutical business, Myriad Pharmaceuticals Inc (MYRX). The company's fourth-quarter results now include only its molecular diagnostic business.
  • R&D for the quarter was $4.4 million, slightly below the year-ago spend of $4.8 million.
  • For 2010, analysts are expecting the company to earn $1.44 a share on revenue of $392.2 million, according to Reuters Estimates.
Some analyst views:
  • "The company has obviously taken more aggressive steps to penetrate the obstetrics and gynecology marketplace. Investors are gaining comfort that the company can meet those fiscal 2010 expectations," Canaccord Adams analyst Matthew Scalo told Reuters.
  • Scalo upgraded his rating on the company's stock to "buy" from "hold," and raised his share-price target to $35 from $33.
  • In a research note, RBC Capital Markets analyst Michael Yee said overall the company's long-term growth story is intact. "We believe evidence of continued growth and execution are key to having a more bullish or confident outlook," Yee added.
[May 4, 2009: Myriad Genetics Slight Miss on Revenue; Beats on Earnings]
[Mar 2, 2009: Starter Stake in Myriad Genetics]
[Feb 3, 2009: Myriad Genetics - Monster Results]
[Jan 20, 2009: Myriad Genetics - Another Diagnostic Heavy Hitter]

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