Bio-Rad (BIO) Misses Q3 Earnings Estimates, Cuts 2023 View
Bio-Rad Laboratories, Inc. BIO posted third-quarter 2023 adjusted earnings per share (EPS) of $2.33, missing the Zacks Consensus Estimate by 18.8%. However, the bottom line declined 10.4% 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 EPS of the company was $3.64 per share in the third quarter against a GAAP loss of $5.48 in the year-ago quarter.
Revenues in Detail
Revenues of $632.1 million in the quarter missed the Zacks Consensus Estimate by 8.5%. The figure dropped 7.2% from the year-ago quarter’s levels (down 7.9% at the constant exchange rate or CER). The company reported
COVID-19-related revenues of $0.3 million, a significant decline from the $17.2 million reported a year ago.
Segmental Analysis
Sales in the Life Science segment in the third quarter totaled $263.5 million, down 17.1% year over year and 17.8% at CER. Excluding pandemic-related sales, Life Science revenues declined 13.7% due to lower sales of qPCR and process chromatography and western blotting products. This compares with our model’s projection of $345.4 million for the third quarter.
Net sales in the Clinical Diagnostics segment totaled $368.1 million, up 1.7% on a year-over-year basis and 1% at CER. Apart from COVID-19-related sales, revenues increased 1.4% year over year, led by the increased demand for diagnostic testing systems and quality control products. This compares with our model’s projection of $344.7 million for the third quarter.
Margins
In the quarter under review, Bio-Rad’s gross profit fell 9.9% to $335.7 million.
The gross margin contracted 162 basis points (bps) to 53.1%. 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.
Operating expenses were $244.7 million in the third quarter, down 11.9% year over year. The operating profit totaled $90.9 million, down 3.9% from the prior-year quarter’s levels. The operating margin in the third quarter expanded 49 bps to 14.4%.
Financial Update
Bio-Rad exited the third quarter of 2023 with cash and cash equivalents (including short-term investments) of $1.76 billion compared with $1.73 billion at the end of the second quarter of 2023. Total debt (including current maturities) at the end of the third quarter was $1.19 billion, almost in line with the reported figure at the end of first-quarter 2023.
Bio-Rad Laboratories, Inc. Price, Consensus and EPS Surprise
Bio-Rad Laboratories, Inc. price-consensus-eps-surprise-chart | Bio-Rad Laboratories, Inc. Quote
The cumulative net cash flow from operating activities at the end of the third quarter of 2023 was $293.9 million compared with the year-ago figure of $114.8 million.
2023 Guidance
Bio-Rad updated its guidance for the full year 2023.
The company anticipates currency-neutral revenue growth of approximately 3.5% (up from the previous guidance of 0.8%). Excluding pandemic-related sales, the company estimates currency-neutral 2023 revenue growth of 0-0.5% (earlier 4.5%). The Zacks Consensus Estimate for revenues is pegged at $2.81 billion.
The adjusted operating margin projection for the full year is 14.5% (earlier 16%).
Our Take
Bio-Rad exited the third quarter of 2023 with lower-than-expected earnings and revenues. A significant decline in COVID-19-related sales led to the year-over-year decrease in the quarter’s top line. Further deterioration in biopharma and early biotech customer spending, as well as a challenging macroeconomic environment in China, impacted third-quarter performance. Meanwhile, a contraction in the adjusted gross margin also raises apprehension. Given the uncertain pace of the biopharma sector’s recovery and the ongoing macro challenges, Bio-Rad lowers its full-year 2023 outlook, which is discouraging.
On a positive note, the company witnessed growth across the Clinical Diagnostics segment driven by increased demand for diagnostic testing systems and quality control products.
Zacks Rank & Key Picks
Bio-Rad currently carries a Zacks Rank #4 (Sell).
Some of the top-ranked stocks from the broader medical space that are supposed to report earnings soon are Addus HomeCare ADUS, Insulet PODD and Inari Medical NARI.
Addus currently carries a Zacks Rank #1 (Strong Buy). The Zacks Consensus Estimate for its third-quarter 2023 adjusted EPS is pegged at $1.05. The same for its revenues stands at $266.2 million.
Addus has a long-term historical growth rate of 12.6%. ADUS’ earnings yield of 5.24% compares favorably with the industry’s yield of 4.37%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Insulet’s third-quarter 2023 adjusted EPS is currently pegged at 40 cents. The consensus estimate for revenues is pegged at $413.8 million. Insulet currently carries a Zacks Rank #2 (Buy).
Insulet has an estimated long-term growth rate of 41.5%. PODD’s earnings yield of 1.14% compares favorably with the industry’s -2.62%.
Inari Medical currently has a Zacks Rank #2. The Zacks Consensus Estimate for its third-quarter 2023 adjusted EPS is currently pegged at a breakeven level. The same for revenues is pegged at $122.4 million.
NARI has an estimated growth rate of 107.3% for 2023. NARI’s earnings yield of 0.07% compares favorably with the industry’s yield of -8.47%.
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