Diagnostics Firm Crushes Earnings Estimates And Is Heading Higher

| About: Alere Inc. (ALR)

Alere (NYSE:ALR) reported earnings before the bell Monday. It was the third straight quarter the stock easily beat earnings estimates. The stock is down significantly from where it was last summer and ALR has spent most of the last nine months in a trading range between $20 and $25 (See Chart). However, this latest earnings report might be the impetus for the stock to break out of its recent range and go higher.

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Key earnings highlights for Alere:

  • Earnings came in at 77 cents a share, easily beating estimates by a dime a share.
  • Revenues increased over 15 Y/Y to $672.4mm, beat estimates by more than $13mm.
  • Gross margins slightly improved Q/Q and Y/Y and its Professional Diagnostics Division grew revenues an impressive 25% Y/Y.

4 additional reasons Alere has solid potential to go higher from $26 a share:

  • The stock has a forward PE of 9, substantially below its five year average (15.8).
  • Growth potential seems underpriced by the market. Analysts expect the company to grow revenues by over 12% in FY2012 and the stock has a five year projected PEG of under 1 (.80).
  • The stock is cheap at 86% of annual revenues and under 8 times operating cash flow.
  • The median price target by the 9 analysts that cover the stock is $32 a share. Based on latest earnings report, I would look for this target to move higher in the coming weeks.

Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in ALR over the next 72 hours.