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Bio-Techne (TECH) Q2 Earnings Beat, Gross Margin Declines

Zacks Equity Research

Bio-Techne Corporation TECH reported second-quarter fiscal 2019 adjusted earnings per share (EPS) of $1.06, up 3.9% from the year-ago quarter.  This figure surpassed the Zacks Consensus Estimate by 6%.

Reported EPS in the quarter under review was 45 cents, down 65.1% year over year.

Net sales in the quarter rose 13.2% (up 11% organically) year over year to $174.5 million. This figure beat the Zacks Consensus Estimate by 2.6%.

Revenues saw a 3% contribution from acquisitions. However, foreign currency translation had a 1% adverse impact.

Revenues by Geography

United States reported revenues in the low teens during the reported quarter. Growth within Europe was in the high single digits (organically). China registered robust performance with growth of more than 30% from the year-ago quarter. For the rest of Asia, organic growth was in the mid-teens led by solid contributions from South Korea and India.

Segment Details

The company has two key operating divisions, viz.  Protein Sciences & Diagnostics and Genomics.

Bio-Techne Corp Price, Consensus and EPS Surprise


Bio-Techne Corp Price, Consensus and EPS Surprise | Bio-Techne Corp Quote

In the reported quarter, Protein Sciences saw 15.7% growth from the prior-year quarter (up 14% organically) to $135.5 million. The upside was primarily driven by double-digit growth in most consumable and instrument product categories.

The Diagnostics and Genomics segment's net sales came in at $39.3 million, up 5.9% (up 2% organically) from the year-ago quarter.

By end market, biopharma growth was 10% and academic sales growth was in the mid-single digits.

Margin Details

Gross profit in the second quarter increased 10.9% year over year to $113.1 million. However, gross profit margin contracted 130 basis points (bps) from the year-ago quarter to 64.8% on a 17.5% rise in cost of sales.

Selling, general and administrative expenses (SG&A) dropped a slight 0.3 % year over year to $63.6 million. Research & development (R&D) expenses totaled $15.8 million, up 13.7% from the year-ago quarter. Operating profit witnessed year-over-year growth of 39.2% to $33.6 million. Operating margin expanded 359 bps from the year-ago period to 19.3%.

According to the company, volume leverage and operational productivity contributed to the Protein Sciences segment’s operating margin in the quarter. Meanwhile, within Diagnostics and Genomics, operating margin was impacted by the recent acquisition of ExosomeDx.

Balance Sheet

Bio-Techne exited the second quarter of fiscal 2019 with cash and cash equivalents and short-term investment of $156.5 million, down from $163.7 million at the end of first quarter of fiscal 2019. The company had total long-term debt of $545.4 million at the end of second quarter of fiscal 2019, compared with $561.4 million at the end of the first quarter of fiscal 2019.

Our Take

Bio-Techne exited the second quarter of fiscal 2019 on a promising note. The company reported robust top-line growth in its operating segments and geographic locations.

On a positive note, consumer demand for the reagent and instrument products has been consistently rising in emerging markets. The brands of Bio-Techne continue to garner high demand in both the end markets. We are optimistic about the company’s ability to continue on its growth trajectory.

Zacks Rank & Key Picks

Bio-Techne currently has a Zacks Rank #3 (Hold). A few better-ranked medical stocks are Abbott Laboratories ABT, AngioDynamics Inc. ANGO and CONMED, Corp. CNMD.
Abbott reported fourth-quarter 2018 adjusted EPS of 81 cents, in line with the Zacks Consensus Estimate. Revenues of $7.77 billion were below the Zacks Consensus Estimate of $7.79 billion. The stock has a Zacks Rank #2 (Buy).

AngioDynamics’ fiscal second-quarter adjusted EPS of 22 cents exceeded the Zacks Consensus Estimate by a penny. Revenues totaled $91.5 million, beating the consensus estimate by 2.9%. The stock sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

CONMED delivered fourth-quarter adjusted EPS of 73 cents, in line with the Zacks Consensus Estimate. Revenues of $242.4 million beat the Zacks Consensus Estimate of $229.2 million. The stock carries a Zacks Rank of 2.

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