Bio Rad (BIO) Global Growth Strong, Expenses Continue to Rise
Bio-Rad Laboratories, Inc. BIO has been witnessing strength in international markets. Further, strong key product lines across major geographic regions buoy optimism. However, foreign exchange fluctuations and a difficult pricing scenario are major downsides. The stock currently carries a Zacks Rank #3 (Hold).
Over the past year, Bio-Rad has outperformed its industry. The stock has gained 46.1% against the industry’s 4.1% drop.
Bio-Rad exited the second quarter of 2021 with better-than-expected results. The company witnessed solid top-and bottom-line growth in the reported quarter. Strength in its key product lines across major geographic regions buoys optimism. The uptick in the Clinical Diagnostics arm driven by the ongoing recovery across product lines in all regions during the reported quarter is encouraging as well.
The year-over-year sales growth in the second quarter was driven mainly by increases in western blotting, Droplet Digital PCR and qPCR products. The company has witnessed strong growth in the biopharma market for the Droplet Digital PCR platform. The government funding for public health labs is driving demand for ddPCR products that offer automated solutions with high accuracy and sensitivity. Further, the company witnessed solid demand for QX ONE in wastewater testing applications for COVID-19 during the reported quarter. The raised 2021 revenue guidance is indicative of the continuation of this bullish trend through the year.
In recent times, Bio-Rad has been deriving more than 60% of its net sales globally. Europe happens to be the largest international market for the company. Geographically, Bio-Rad experienced currency-neutral growth across all three regions. The company continued to see strong demand for products associated with COVID-19 testing and related research.
BioRad Laboratories, Inc. Price and Consensus
BioRad Laboratories, Inc. price-consensus-chart | BioRad Laboratories, Inc. Quote
In the Life Science business, all regions witnessed growth compared to the year-ago quarter. Further, growth in the company’s Clinical Diagnostics segment registered double-digit growth across all its product lines driven by a recovery in routine testing. The company also noted continued gradual capacity improvement at both academic and diagnostic labs, returning to 90% and 95% of pre-COVID levels.
However, the year-over-year rise in operating costsis worrying. Operating expenses were $276.8 million in the second quarter, up 14.7% year over year.
Bio-Rad has been involved in a multi-year implementation of a new global enterprise resource planning (ERP) system. Any shortfall in the design or implementation of ERP might have a detrimental impact on the company’s abilities to process and dispatch orders, sending invoices and tracking payments, meeting contractual obligations or maintaining normal business operations.
Further, foreign-exchange woes, stiff competition and pandemic-led macroeconomic troubles persist.
Key Picks
A few better-ranked stocks from the broader medical space are Envista Holdings Corporation NVST, BellRing Brands, Inc. BRBR and Hill-Rom Holdings, Inc. HRC, each carrying a Zacks Rank #2 (Buy). You can see the complete list of Zacks #1 Rank (Strong Buy) stocks here.
Envista Holdings has an estimated long-term earnings growth rate of 27%.
BellRing Brands has an estimated long-term earnings growth rate of 29%.
Hill-Rom has a projected long-term earnings growth rate of 5%.
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