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Bio-Rad (BIO) Q4 Earnings Surpass Estimates, Margins Rise

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Zacks Equity Research
·6 min read
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Bio-Rad Laboratories, Inc. BIO posted fourth-quarter 2020 adjusted earnings per share ("EPS") of $4.01, which surpassed the Zacks Consensus Estimate by 29.4%. Moreover, the bottom line rose 72.8% from the prior-year quarter.

The quarter’s adjustments eliminate the impacts of certain non-recurring items like amortization of purchased intangibles, legal charges, restructuring costs and acquisition-related one-time benefits.

GAAP EPS of the company was $27.81 per share in the quarter, up from the year-ago quarter's EPS of $18.31, reflecting an uptick of 51.9%.

Full-year adjusted EPS was $10.52, reflecting a 49% increase from the year-ago period. Moreover, the metric surpassed the Zacks Consensus Estimate by 9.5%.

Full-year GAAP EPS was $126.20, reflecting a surge of 116.6% from the year-ago period.

Revenues in Detail

Bio-Rad’s revenues of $789.8 million in the quarter surpassed the Zacks Consensus Estimate by 15.9%. Moreover, revenues improved 26.5% from the year-ago quarter (up 24.4% at constant exchange rate or CER).

Per the company, fourth-quarter revenues were boosted by damages award related to intellectual property litigation with 10x Genomics amounting to $32 million. Further, strong demand for products associated with COVID-19 testing and related research were observed during the quarter.

Full-year revenues were $2.55 billion, reflecting a 10.1% increase (up 10.3% at CER) from the year-ago period. Again, the metric surpassed the Zacks Consensus Estimate by 4.5%.

BioRad Laboratories, Inc. Price, Consensus and EPS Surprise

BioRad Laboratories, Inc. Price, Consensus and EPS Surprise
BioRad Laboratories, Inc. Price, Consensus and EPS Surprise

BioRad Laboratories, Inc. price-consensus-eps-surprise-chart | BioRad Laboratories, Inc. Quote

Segmental Analysis

Sales at the Life Science segment in the fourth quarter totaled $428.5 million, up 77.1% year over year and 73.9% at CER. The growth at CER was primarily driven by sales of Polymerase Chain Reaction (“PCR”) product lines on the back of robust pandemic-led demand as well as strong performance in the biopharma segment. This segment also included the damages award related to intellectual property litigation. Other growth contributors were strength in Droplet Digital PCR and Process Media products. Geographically, the company’s quarterly growth at CER was experienced by all regions.

Net sales at the Clinical Diagnostics segment totaled $359.6 million, down 5.1% on a year-over-year basis and 6.6% at CER. The downside at CER was driven by lower demand due to the pandemic and was across most product lines as well as all regions.

Margins

In the quarter under review, Bio-Rad’s gross profit rose 39.3% to $460.2 million. Gross margin expanded 534 basis points (bps) to 58.3%. Per the company, adjusted gross margin was 58.2%, expanding 150 bps.

Operating expenses were $284.9 million in the fourth quarter, up 5% year over year. Operating profit totaled $175.2 million, reflecting a stupendous upsurge of 195.9% from the prior-year quarter. Further, operating margin in the fourth quarter expanded 1271 bps to 22.2%.

Company-adjusted operating margin was 21.4%, expanding 710 bps year over year.

Financial Update

Bio-Rad exited the year with cash and cash equivalents (including short-term investments) of $9.9 million compared with $1.12 billion at the end of 2019. Total debt (including current maturities) at the end of 2020 was $14.1 million compared with $439.8 million.

Cumulative net cash flow from operating activities at the end of 2020 was $575.3 million compared with $457.9 million in the year-ago period.

2021 Guidance

Although Bio-Rad put up a strong performance in 2020 amid the gradual return to pre-pandemic activity levels and normalized business mix, the company continues to be uncertain about the duration and impact of the pandemic.

Bio-Rad expects full-year revenues to be up 4.5-5% at CER year over year. Further, the Life Science segment’s growth is expected to be flat as the company projects lower sales of pandemic-related products in 2021. However, the Clinical Diagnostics segment is likely to grow by 10-11% for the year.

Our Take

Bio-Rad exited the fourth quarter of 2020 with better-than-expected results. The company witnessed solid bottom-line growth in the quarter. Despite the negative impact of the pandemic, its Life Science segment registered growth on robust sale of products associated with the pandemic, thus providing some counterbalance. Further, strength in many of its key product lines across major geographic regions buoys optimism.

The uptick in PCR, Droplet Digital PCR and Process Media product revenues resulted from robust demand due to COVID-19 testing and related research. Continued momentum of the Droplet Digital PCR business looks encouraging. Notably, Bio-Rad launched two new PCR systems — the CFX Opus 96 and the CFX Opus 384 — in October 2020. This strengthens the company’s global response and contribution to the fight against the pandemic, raising optimism on the stock. The recent receipt of the FDA’s Emergency Use Authorization (“EUA”) for a COVID-19, influenza A and influenza B RT-PCR syndromic multiplex test along with another EUA for the company’s COVID RT-PCR assay kit (obtained in January this year) look encouraging. Expansion of both margins is encouraging as well.

However, continued decline in the company’s Clinical Diagnostics revenues is concerning.

Zacks Rank and Key Picks

Bio-Rad currently carries a Zacks Rank #3 (Hold).

Some other better-ranked stocks in the broader medical space are Abbott Laboratories ABT, Hologic, Inc. HOLX and IDEXX Laboratories, Inc. IDXX.

Abbott reported fourth-quarter 2020 adjusted EPS of $1.45, which surpassed the Zacks Consensus Estimate by 6.6%. Fourth-quarter worldwide sales of $10.7 billion outpaced the consensus mark by 7.9%. The company currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Hologic reported first-quarter fiscal 2021 adjusted EPS of $2.86, beating the Zacks Consensus Estimate by 33.6%. The company currently flaunts a Zacks Rank #1.

IDEXX reported fourth-quarter 2020 adjusted EPS of $2.01 which surpassed the Zacks Consensus Estimate by 40.6%. Revenues of $720.9 million beat the consensus mark by 5.8%. The company currently carries a Zacks Rank #2.

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