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MEDTOX posts 39% hike in Q2 earnings, but still below Street expectations

Published: 11:24 14 Jul 2011 EDT

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MEDTOX Scientific (NASDAQ:MTOX) announced Thursday its second quarter earnings rose 38.7%, but still lost to analyst estimates, causing shares to drop.

For the three months ending June 30, the testing services and products provider posted net income of $1.4 million, or $0.16 per share, compared to $1.0 million, or $0.11 per share, in the year-ago period.

Revenues rose to $27.9 million, up 10.9% from a year earlier. Analysts had expected earnings of $0.18 per share, on $28.12 million in revenues.

Having finished the quarter below estimates, the company's shares dropped 4.41% on the Nasdaq Exchange, trading at $16.619 per share, as of 10:50 am EDT.

Medtox's laboratory services segment, which includes its drugs-of-abuse testing services and other clinical services, posted revenues of $22.3 million, compared to $19.8 million a year ago.

The rise in lab services was attributed to a near 18% boost in sales from new business, offset by an 11.4% drop in revenues from existing clients, the company said.

The St. Paul, Minnesota-based company saw its diagnostic products division bring in $5.7 million in sales, compared to $5.4 million in the second quarter of 2010.

Medtox said solid growth in substance abuse products was offset by a $339,000 reduction in contract manufacturing revenues.

Still, the company said it is aiming to exit the contract manufacturing business, expecting to terminate related client relationships by the end of the year.

Gross margins improved 220 basis points, growing to 43.3% from 41.1% a year ago.

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