Barclays on U.S. Diagnostics: Q1 Earnings Preview

April 23, 2012 2:54 PM EDT
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Barclays on U.S. Diagnostics: Q1 Earnings Preview

Analyst, Nandita Koshal, said, "Recent data-points from clinical labs have suggested a stable macro environment, with a low single digit increase in volumes. Positive signals from the US labor market bear watching, but are somewhat offset by concerns around European trends. In fact, both GE (NYSE: GE) and Danaher (NYSE: DHR) called out softness in European markets, with US demand holding up well."

"Accelerating new product cycles could help buck the unfavorable trends. Our preferred names are companies that are in the early stages of penetrating significant market opportunities; Gen-Probe (Nasdaq: GPRO) and Qiagen (Nasdaq: QGEN) play into the theme of democratization of molecular testing with their mid-throughput platforms, while Sequenom (Nasdaq: SQNM) has a significant first mover advantage with its non-invasive prenatal Down syndrome test. We also note improving investor sentiment and business momentum for Hologic (Nasdaq: HOLX) on the back of its Tomo product cycle, even as near-term concerns remain around the utilization-sensitive and high margin gyn-surgical and diagnostics businesses."

Barclays analysts also notes the importance of capital deployment, saying GPRO and Becton, Dickinson (NYSE: BDX) have consistently returned cash to stockholders, and QGEN and HOLX investors have put recent pressure on the company's to take action (stock buyback or dividend. GPRO, QGEN and SQNM are Overweight rated.

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