Bio-Rad (BIO) Beats on Q2 Earnings Estimates, Cuts 2023 View
Bio-Rad Laboratories, Inc. BIO posted second-quarter 2023 adjusted earnings per share (EPS) of $3.00, beating the Zacks Consensus Estimate by 17.7%. However, the bottom line declined 12.8% from the prior-year quarter’s levels.
The quarter’s adjustments eliminate the impacts of certain non-recurring items like the amortization of purchased intangibles, gains/losses from the change in the fair market value of equity securities and loan receivable and restructuring costs.
The GAAP loss per share of the company was $39.59 in the second quarter against a GAAP loss of $31.05 in the year-ago quarter.
Revenues in Detail
Revenues of $681.1 million in the quarter missed the Zacks Consensus Estimate by 0.9%. The figure dropped 1.4% from the year-ago quarter’s levels (down 0.3% at the constant exchange rate or CER). The company reported COVID-19-related revenues of $0.4 million, a significant decline from the $33 million reported a year ago.
Segmental Analysis
Sales in the Life Science segment in the second quarter totaled $300.2 million, down 6.9% year over year and 5.8% at CER. The downside was primarily due to lower COVID-19-related sales. Excluding pandemic-related sales, Life Science revenues increased 4.5%, primarily driven by Droplet Digital PCR and qPCR products. This compares with our model’s projection of $396.3 million for the second quarter.
Net sales in the Clinical Diagnostics segment totaled $380.1 million, up 3.3% on a year-over-year basis and 4.6% at CER. Apart from COVID-19-related sales, revenues increased 4.8% year over year, led by the continued strong demand for diagnostic testing systems and quality control products. This compares with our model’s projection of $388.8 million for the second quarter.
Margins
In the quarter under review, Bio-Rad’s gross profit fell 8.2% to $362.5 million.
The gross margin contracted 394 basis points (bps) to 53.2%. This can be attributed to an unfavorable product mix, with a higher-than-anticipated percentage of instrument sales versus reagents and a higher cost of raw materials.
Bio-Rad Laboratories, Inc. Price, Consensus and EPS Surprise
Bio-Rad Laboratories, Inc. price-consensus-eps-surprise-chart | Bio-Rad Laboratories, Inc. Quote
Operating expenses were $272.9 million in the second quarter, up 0.3% year over year. The operating profit totaled $89.6 million, down 27.1% from the prior-year quarter’s levels. The operating margin in the second quarter contracted 462 bps to 13.2%.
Financial Update
Bio-Rad exited the second quarter of 2023 with cash and cash equivalents (including short-term investments) of $1.73 billion compared with $1.85 billion at the end of the first quarter of 2023. Total debt (including current maturities) at the end of the second quarter was $1.19 billion, near the reported figure at the end of first-quarter 2023.
The cumulative net cash flow from operating activities at the end of the second quarter of 2023 was $196.2 million compared with the year-ago figure of $103.7 million.
2023 Guidance
Bio-Rad updated its guidance for the full year 2023.
The company anticipates currency-neutral revenue growth of approximately 0.8% (previously 4.5%). Excluding pandemic-related sales, the company estimates currency-neutral 2023 revenue growth of 4.5% (earlier 8.5%). The Zacks Consensus Estimate for revenues is pegged at $2.90 billion.
The adjusted operating margin projection for the full year is 16% (earlier 17.5%).
Our Take
Bio-Rad exited the second quarter of 2023 with an earnings beat while revenues missed estimates. The company witnessed growth across the Life Science portfolio and strong double-digit growth for ddPCR, despite the negative BioPharma macro trends. The ongoing demand for the company’s new QX600 Droplet Digital PCR System looks encouraging. Moreover, the company witnessed continued demand recovery for its Clinical Diagnostics business, particularly across Asia Pacific, led by solid performance in China.
A significant decline in COVID-19-related sales impacted the year-over-year decrease in the quarter’s top line. Further lower demand from BioPharma customers, particularly for its process chromatography media impacted Q2 performance.
Meanwhile, a contraction in the adjusted operating margin also raises apprehension. BIO’s gross margin for the quarter was additionally impacted by the higher-than-anticipated percentage of instrument sales versus reagents and lower-than-forecasted revenues in the Life Science Group.
Zacks Rank & Key Picks
Bio-Rad currently carries a Zacks Rank #4 (Sell)
Some better-ranked stocks in the broader medical space that have announced quarterly results are Penumbra, Inc. PEN, Integer Holdings Corporation ITGR and Intuitive Surgical, Inc. ISRG.
Penumbra, carrying a Zacks Rank of 1 (Strong Buy), reported second-quarter 2023 adjusted EPS of 43 cents, beating the Zacks Consensus Estimate by 53.6%. Revenues of $261.5 million outpaced the consensus mark by 3.3%. You can see the complete list of today’s Zacks #1 Rank stocks here.
Penumbra has a estimated 2024 growth rate of 57.9%. PEN’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 94.2%.
Integer Holdings reported second-quarter 2023 adjusted EPS of $1.14, beating the Zacks Consensus Estimate by 15.2%. Revenues of $400 million surpassed the Zacks Consensus Estimate by 8.9%. It currently carries a Zacks Rank #2.
Integer Holdings has a long-term estimated growth rate of 12.1%. ITGR’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 8.4%.
Intuitive Surgical reported second-quarter 2023 adjusted EPS of $1.42, beating the Zacks Consensus Estimate by 7.6%. Revenues of $1.76 billion surpassed the Zacks Consensus Estimate by 1.4%. It currently carries a Zacks Rank #2.
Intuitive Surgical has a long-term estimated growth rate of 14.5%. ISRG’s earnings surpassed estimates in three of the trailing four quarters and missed once, the average surprise being 4.2%.
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