Immucor, Inc. (BLUD) reported Q3 EPS that beat our estimate by $0.04 on revenue that also exceeded our forecast. Management expects revenue, gross margin, and EPS to be at the high end or modestly higher from the guidance that was previously announced on May 31, 2007. The pending acquisition of BioArray Solutions is expected to be significantly dilutive over the next several years. We lowered our FY09 EPS estimate accordingly.
The strong earnings growth has been driven by double-digit sales growth, gross margin expansion, and operating cost control. Although under pressure from the Echo launch, gross margins are expected to regain momentum next fiscal year.
Our price target is based on roughly 33x FY09 EPS estimate. At its current price of $27.45 per share, BLUD is trading at roughly 28x our fiscal 2009 earnings estimate of $0.97 per share, which is at a discount to the group multiple of roughly 31x. Although continuing to grow, revenue may fall below expectations due to lower than anticipated sales from the customer loyalty program and Europe. Our target price moves to $32.
Aside from the pressures of the Echo launch, gross margins are expected to regain momentum from the eventual growth in reagent sales, manufacturing efficiencies, and price increases. We expect some downward pressure on the stock from the FTC inquiry announced in the fiscal 2008 second quarter and the significant dilutive impact over the next several years after acquiring BioArray Solutions.
Read the full analyst report on BLUD.
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