Cepheid falls on expected 3Q revenue shortfall
NEW YORK (AP) — Shares of Cepheid dropped Thursday after the molecular diagnostics company gave a disappointing third-quarter revenue forecast, saying production problems are hurting its sales.
THE SPARK: After the market closed on Wednesday, Cepheid said it was not able to make enough cartridge parts for its GeneXpert testing system. As a result $5 million in orders will be filled in the fourth quarter instead of the third. The Sunnyvale, Calif., company said it expects to report $79 million to $81 million in revenue for the quarter.
According to FactSet, analysts expected $83.7 million in revenue, on average.
THE BIG PICTURE: Cepheid's GeneXpert testing system can diagnose illnesses including tuberculosis, influenza, drug-resistant MRSA infections, C. difficile, and enteroviral meningitis.
Cepheid said its third-quarter revenue will include a "strong contribution" from a program that helps developing countries get access to its test for drug-resistant tuberculosis. However it expects weaker U.S. commercial system sales because of reduced capital spending.
For the full year, Cepheid still expects to report revenue of $333 million to $347 million. Analysts expected $333.4 million, on average.
THE ANALYSIS: William Blair & Co. analyst Brian Weinstein maintained an "Outperform" rating on Cepheid shares, but noted that this isn't the first time the company has disclosed an unexpected problem.
"This is the third straight quarter where Cepheid has had some sort of explainable issue that has caused frustration," Weinstein wrote.
In July Cepheid said the tuberculosis test program was hurting its profitability and cut its annual guidance. And in April, the company said it lost money because of costs related to manufacturing expansion and a bigger-than-expected investment in finishing a clinical trial.
SHARE ACTION: Cepheid stock lost $3.09, or 7.9 percent, to $36.06 in afternoon trading. The shares have traded between $29.90 and $46 over the last 12 months.