Life Technologies: Preview

Life Technologies (LIFE) is scheduled to report its fourth-quarter and fiscal 2012 results on Monday, Feb 4, 2013, after market closes. Let’s see how things are shaping up before the announcement.

Growth Factors This Past Quarter
Life Technology’s performance has been thwarted by a sustained slowdown in government and academic research funding. Although the company does not expect the scenario to worsen in the near future, yet this global biotechnology company is repositioning for a slower growth environment by lowering the cost structure and increasing focus on R&D initiatives. Moreover, Life Technologies has consistently adopted a conservative outlook and expects the overall growth of the European region to be impacted by macroeconomic pressures through continued reductions in discretionary spending. Further worsening of the economic scenario in Europe might adversely impact the company.

However, over the last two years, the company has been focused on creating an optimal portfolio of products through innovation and acquisition, the latest being Ion Torrent. We are also encouraged by Life’s strategy to strengthen its presence in high growth geographic markets such as Latin America, the Middle East, China and India.  Over the next few years, Life’s focus on developing industry-leading franchises in high-growth technology areas, applied markets and emerging geographies will be the key drivers of long-term growth.

Earnings Whispers?
Our proven model does not conclusively show that Life Technologies is likely to beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP (read: Zacks Earnings ESP: A Better Method) and a Zacks Rank of #1, 2 or 3 for this to happen. This is not the case here as you will see below.
Zacks Earnings ESP of -0.90%: The Most Accurate Estimate stands at $1.10, while the Zacks Consensus Estimate is pegged at $1.11. This comes to a difference of -0.90%.

Life Technologies’ Zacks Rank #3 (Hold) lowers the predictive power of ESP because the Zacks Rank #3 when combined with a negative ESP makes surprise prediction difficult. The sell rated stocks (#4 and #5) should never be considered going into an earnings announcement.