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Here's Why You Should Retain Bruker (BRKR) Stock for Now

·5 min read

Bruker Corporation BRKR is gaining from continued strength across the Bruker Scientific Instruments (BSI) and the Bruker Energy & Supercon Technologies (BEST) segments. The company’s earnings for the second quarter of 2022 were in line with the Zacks Consensus Estimate. Robust bookings and backlog growth instill optimism. However, escalating costs and macroeconomic headwinds do not bode well.

In the past year, this Zacks Rank #3 (Hold) stock has lost 33.2% against the 29.1% decline of the industry and a 18.4% fall of the S&P 500 composite.

The renowned medical device company has a market capitalization of $8.31 billion. The company surpassed earnings estimates in two of the trailing four quarters and met estimates on two occasions, the average surprise being 14.9%.

In the past five years, the stock has gained 13.7% compared with the industry’s 20.7% rise and the S&P 500’s 13.4% increase. The long-term expected growth rate is estimated at 16.9% compared with the industry’s growth expectation of 20.4% and the S&P 500’s estimated 11.4% growth.

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

Let’s delve deeper.

Factors at Play

Q2 Upsides: Bruker ended the second quarter with earnings matching the consensus mark. The top line was driven by robust performances across all geographies and the BSI and BEST businesses. The continued uptake of the timsTOF platform seems promising. The company delivered robust bookings and backlog growth in the reported quarter. Expansion in gross margin amid ongoing inflationary headwinds adds to the upsides. A favorable solvency position bodes well.

BSI Nano Group Grows: Bruker’s Nano Group’s microelectronics and semiconductor metrology tools continue to perform well. In the second quarter, revenues in the Nano Group climbed 3.9%. Nano organic revenue grew in the high single-digit percentage, driven by strength in industrial research and semiconductor businesses. The microelectronics and semiconductor metrology tools recorded strong bookings and backlog growth in the quarter under review.

Strong Prospects for BioSpin: In the second quarter, Bruker’s BioSpin revenues rose 7.6% from the year-ago period, benefitting from the revenue recognition of one 1.2 gigahertz class NMR system. The company was involved in notable BioSpin innovations for the reported quarter, including the single-story 1.0 gigahertz magnet to enhance accessibility to GigaHertz NMR for more functional structural biology and drug discovery laboratories. The company also launched advanced capabilities on its Benchtop Fourier 80 FT-NMR system to facilitate broader applications in pharmaceutical and applied markets analysis.

Bruker continues to expect 4 gigahertz class NMRs in revenues for 2022, including one in the second quarter, one expected in the third quarter and two in the fourth quarter.

Downsides

Escalating Expenses: Bruker’s selling, general & administrative expenses rose 12.9% and research and development expenses increased 6.8% in the second quarter of 2022.These mounting operating expenses drove adjusted operating expenses by 11.1% year over year, leading to a 108 basis points contraction in adjusted operating margin.

Macroeconomic Headwinds: Bruker’s operations continue to be challenged by uncertain economic conditions, especially in countries like the United States, Russia and certain European nations. The company continues to experience persistent supply chain disruptions and logistics delays.

Forex Woes: Since Bruker conducts 80% of its business in international markets, unfavorable currency movements continue to lead to foreign currency transaction losses at the company. In addition, currency fluctuations could cause the price of Bruker’s products to be less competitive than its principal competitors' offerings.

Estimate Trend

In the past 90 days, the Zacks Consensus Estimate for Bruker’s 2022 earnings has moved 0.9% down to $2.29.

The Zacks Consensus Estimate for its 2022 revenues is pegged at $2.52 billion, suggesting a 4.3% rise from the year-ago reported number.

Key Picks

A few better-ranked stocks in the broader medical space that investors can consider are AMN Healthcare Services, Inc. AMN, ShockWave Medical, Inc. SWAV and McKesson Corporation MCK.

AMN Healthcare has a long-term earnings growth rate of 3.2%. The company surpassed earnings estimates in the trailing four quarters, delivering a surprise of 15.7%, on average. It currently flaunts a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

AMN Healthcare has outperformed its industry in the past year. AMN has lost 17.4% against the industry’s 30.7% fall.

ShockWave Medical, sporting a Zacks Rank #1 at present, has an estimated growth rate of 33.1% for 2023. The company’s earnings surpassed estimates in all the trailing four quarters, the average beat being 180.1%.

ShockWave Medical has outperformed its industry in the past year. SWAV has gained 63.8% against the industry’s 32.3% fall over the past year.

McKesson has an estimated long-term growth rate of 9.9%. The company surpassed earnings estimates in the trailing three quarters and missed in one, delivering a surprise of 13%, on average. It currently carries a Zacks Rank #2 (Buy).

McKesson has outperformed its industry in the past year. MCK has gained 46.4% against the industry’s 13.3% fall.


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