Applied Biosystems Group: Making Life Science Happen

Dec.11.06 | About: Safety First (ABI)

Applied Biosystems Group (NYSE:ABI), a unit of Applera Corporation, helps make leaps and bounds in life sciences. Through its Applications and Products group, the company supplies life science firms and research institutes with a host of products and services for researching genes and proteins, studying how drugs interact with the body's systems [pharmacokinetics] and genetic makeup [pharmacogenomics], testing food and the environment for contaminants, and performing DNA-based identification. The firm oversees licensing of sister company and key client Celera Group's (NASDAQ:CRA) genome databases as that company tries to focus on drug development.

This stock is a little like buying Levi's in the gold rush days. Investors can participate in an industry indirectly by investing in a supplier of equipment that the industry needs. In other words, an investor may like an industry but wants to lower risk by avoiding a direct investment in any one company. What Applied Biosystems makes, the whole life science and research institutes industry uses.

The company has some good numbers: there's no debt on the books. Return on Equity is a robust 14.5%. Current assets are double current liabilities. Analysts are looking for earnings to grow by 12.5% a year, on average, over the next 5 years. Earnings have been growing at a rate of 8% annually, on average, over the last 5. Sales are fore-casted to improve by 8% a year, on average, over the next 5 after growing by 5%, on average, over the last 5.

For next quarter [ending on December 31], expect earnings of 33 cents a share, up from 29 cents the previous quarter and 31 cents last year for the same quarter. For the full year [ending June 30], look for $1.35, 11 cents above 2006's eps [earnings per share] of $1.24.

Last quarter [ended in September] the company reported a sales increase of 15% compared to the same quarter the previous year. Revenues increased around the world but especially in the Asia/Pacific region. In the same quarter, eps jumped by 21%. Analysts expect revenue growth to continue with better contributions coming from emerging market countries such as China, India and Russia. Foreign sales were 56.4% of total revenues in 2006.

ABI 1-yr chart
ABI 1-yr chart

Disclosure: Author has no position in ABI.