Bio-Rad Laboratories, Inc. BIO is well poised for growth backed by robust segmental performance and solid prospects within the blood typing market.
In the past six months, the company’s shares have outperformed the industry. The stock has gained 5.7% compared with the industry’s 2.1% loss and the S&P 500’s 0.8% dip.
The company has a market cap of $21.23 billion.
Courtesy of solid prospects, this Zacks Rank #3 (Hold) stock is worth holding on to, for now.
What’s Driving the Stock?
Focus on International Markets: Recently, Bio-Rad has been deriving more than 60% of its net sales globally. The company considers Europe as the largest international market. Each of the key product segments of the company has registered overall growth across the major geographies of Europe, EMEA and Asia.
Impressive Segmental Growth: Bio-Rad witnessed constant currency sales growth across all channels in the first quarter. Strength in the Life Sciences segment reflects sales improvement in the cell biology, droplet Digital PCR, food safety and process media products. On a geographic basis, Life Sciences sales were impressive in the Americas. In the Clinical Diagnostics segment, the upside in the currency neutral sales was driven by growth within autoimmune and blood typing products. Despite weakness in the Asia Pacific and parts of Europe, sales during the first quarter rose on solid contributions from the Americas.
Solid Prospects in Blood Typing Market: The company is actively expanding its portfolio for the blood typing market. Performance of the company in the Blood typing market continues to be robust in the first quarter. New product adoption in the United States has been impressive with the recent 510(k) clearance of the IH-Reader 24, a semi-automated blood typing instrument designed for medium- to small-volume laboratories. With the FDA approval of the IH500 in April 2019, growth in the segment is expected to improve further. Hence, the company’s prospects in the market look promising.
Strong Balance Sheet: Effective capital deployment is one of the key contributors to EPS growth. Bio-Rad exited first-quarter 2019 with cash and cash equivalents as well as short-term investments of $864.5 million compared with $850.3 million at the end of 2018. For the first quarter of 2019, net cash flow from operating activities was $42.9 million compared with $40.3 million a year ago. Strong cash position indicates promising return to shareholders.
However, there are a few factors that are impeding the growth of the stock lately.
Tough Competitive Pressure: Bio-Rad operates in a highly-competitive environment, which is dominated by several multi-national corporations. In the Life Science segment, the company primarily competes with Becton Dickinson, GE Biosciences, Merck Millipore and Thermo Fisher Scientific. Again, some prominent competitors in the Clinical Diagnostics segment are Roche, Abbott Laboratories, Siemens, Danaher, Thermo Fisher, Becton Dickinson and DiaSorin.
Reduced Reimbursement Rates: Bio-Rad’s Clinical Diagnostics business is exposed to changing reimbursement rates for clinical tests from third-party payors like Medicare and Medicaid in the United States. Payment for several diagnostic tests furnished to Medicare fee-for-service beneficiaries is dependent on the Medicare Clinical Laboratory Fee Schedule (CLFS).
Which Way are Estimates Heading?
For the second quarter of 2019, the Zacks Consensus Estimate for earnings is pegged at $1.43, indicating 12.8% decline from the year-ago quarter’s figure. The same for revenues is pegged at $573.4 million, calling for year-over-year fall of 0.44% from the prior-year quarter’s number.
For 2019, the Zacks Consensus Estimate for earnings is pegged at $7.15, suggesting 22.43% year-over-year growth from the year-ago figure. The same for revenues is pegged at $2.35 billion, suggesting 2.67% rise from the prior-year number.
Some better-ranked stocks in the broader medical space are Cerner Corporation CERN, Penumbra PEN and Bruker Corporation BRKR. While Cerner sports a Zacks Rank #1 (Strong Buy), Penumbra and Bruker carry a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Cerner’s long-term earnings growth rate is expected to be 13.5%.
Penumbra’s long-term earnings growth rate is projected at 21.5%.
Bruker’s long-term earnings growth rate is estimated at 11.7%.
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