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Here's Why You Should Add Bio-Rad (BIO) to Your Portfolio

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·4 min read
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  • BIO-B

Bio-Rad Laboratories, Inc. BIO has been gaining on an uptick in the Clinical Diagnostics arm driven by the ongoing recovery across product lines in all regions. The company’s better-than-expected results in the second quarter of 2021 buoy optimism. However, downsides may result from a stiff competitive landscape and foreign exchange fluctuations.

Over the past year, shares of this Zacks Rank #2 (Buy) company have outperformed the industry. The company has gained 52.5% compared with 11% growth of the industry 35.5% rise of the S&P 500.

The renowned manufacturer and global supplier of clinical diagnostics and life science research products has a market capitalization of $22.6 billion. The company projects 34.9% growth for the current year. The company surpassed estimates in all of the trailing four quarters, the average surprise being 71.6%.

Let’s delve deeper.

Impressive Q2 Results: We are upbeat about Bio-Rad’s second-quarter 2021 results. The company witnessed solid top-and bottom-line growth in the reported quarter. 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 company also started to see recovery of demand for non-COVID business, with diagnostics labs business returning to about 90-95% of pre-COVID levels. The raised 2021 revenue guidance is indicative of the continuation of this bullish trend through the year.

Clinical Diagnostics Continue to Gain Momentum: Bio-Rad’s second-quarter 2021 clinical diagnostics sales were largely driven by a recovery of routine testing. During the second quarter, the diagnostics group posted double-digit growth across all product lines. In a geographic basis, the diagnostics group currency-neutral year-over-year sales grew across all regions.

Bio-Rad recently teamed up with Seegene -- a global provider of multiplex molecular diagnostics. Bio-Rad will exclusively market the Seegene tests in the United States, pending regulatory approvals. The partnership with Seegene is intended to provide required diagnostic testing products to U.S. markets.

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Raised Guidance: We are optimistic about Bio-Rad’s raised 2021 guidance. The company now anticipates revenue growth of 10-10.5% for full-year 2021 compared with the previous guidance of 5.5-6%.

However, downsides might result from Bio-Rad’s operation in a highly competitive industry, which includes large multinational corporations with significant resources as well as start-ups. Also, the competitive and regulatory conditions in the markets where Bio-Rad operates limit its ability to switch to strategies like price increases or those which might push up costs.

Moreover, Bio-Rad derives more than 50% of its revenues from the international market, which exposes it to the effects of fluctuations in foreign currency.

Estimate Trends

Bio-Rad has been witnessing a positive estimate revision trend for the current year. Over the past 90 days, the Zacks Consensus Estimate for its earnings has moved 17.6% north to $14.20.

The Zacks Consensus Estimate for its third-quarter 2021 revenues is pegged at $671 million, suggesting 3.7% growth from the year-ago reported number.

Other Key Picks

A few other similar-ranked stocks from the broader medical space are Envista Holdings Corporation NVST, Hill-Rom Holdings, Inc. HRC and Henry Schein, Inc. HSIC, each sporting a Zacks Rank #2. You can see the complete list of Zacks #1 Rank (Strong Buy) stocks here.

Envista has a projected long-term earnings growth rate of 27%.

Hill-Rom Holdings has a projected long-term earnings growth rate of 8%.

Henry Schein has an estimated long-term earnings growth rate of 14%.

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Henry Schein, Inc. (HSIC) : Free Stock Analysis Report

BioRad Laboratories, Inc. (BIO) : Free Stock Analysis Report

HillRom Holdings, Inc. (HRC) : Free Stock Analysis Report

Envista Holdings Corporation (NVST) : Free Stock Analysis Report

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