Home Diagnostics, Inc. falls after Q2 results miss estimates
Shares of Home Diagnostics, Inc. (Nasdaq: HDIX) are falling this morning after the manufacturer and marketer of diabetes testing supplies reported weak second-quarter results below analyst expectations.
For the three months ended June 30, the Fort Lauderdale, Fla.-based company recorded earnings of $0.09 per share, below the $0.15 per share analysts were anticipating. The current quarter’s results compare with earnings of $0.11 for the second quarter last year.
“What happened in the quarter is that sales to distributors didn’t match out-the-door sales,” said Barrington Research analyst Derek Leckow. “Distributor days of inventory outstanding ran 50% below last year.”
Total revenue for the second quarter declined 1.7% to $28.1 million, also below analysts’ expectations of $30.3 million. Revenues for the second quarter of 2006 were $28.5 million.
Shares of Home Diagnostics tumbled 32.5%, or $3.69, on the news to a new 52-week low of $7.65 Thursday morning. Shares have been trading in a band of $9.88 to $13.20 for the past year.
“I think the factors behind the stock price battering are an overreaction by the market to a company investors may not fully understand,” said Leckow. “Business trends are positive here. End user demand is strong and growing in the double digits. The company just went public last September and investors may not fully grasp is how health products are distributed. I view it [what happened in the quarter] as easily correctable within the quarter.”
Home Diagnostics reported that distribution channel sales were relatively flat due to the timing of wholesaler orders.
The company is also adjusting guidance for the back half of the fiscal year based on its second quarter results. Home Diagnostics said it now expects to book total revenue in the range of $120 million to $123 million and earnings per diluted share in the range of $0.60 to $0.64. This compares with previously issued guidance of revenue in the range of $126 million to $130 million and earnings per diluted share in the range of $0.62 to $0.67. Five analysts polled by Thomson Financial were expecting earnings for the year of $0.65 per share on revenues of $126.27 million.
Leckow, who estimates earnings of $0.61 per share, within the company’s guidance range, said, “Assuming no increase in distributor inventory levels of their products they should come in right in line with guidance. If distributor inventory levels increases they should beat guidance in the back half of the year.”
