Shares of QIAGEN N.V. QGEN dropped 26.2% on Oct 8, 2019 (to close at $25.41) following the company’s reporting of lower-than-expected preliminary sales performance in the third quarter 2019 and a parallel announcement of its CEO’s sudden exit.
The Q3 Prelim Result at a Glance
QIAGEN expects third-quarter preliminary total net sales growth of 3% at constant exchange rate or CER. This remains below the company’s projection of about 4-5% CER growth for the quarter.
According to QIAGEN, significantly weaker-than-expected developments in China dampened growth. This was beyond the previously announced discontinuation of the company’s GeneReader NGS System joint venture in this geography.
Excluding revenues drawn from China, total sales growth for the third quarter is projected to be 6% at CER. The Zacks Consensus Estimate for 2019 revenues is pegged at $383.7 million.
Meanwhile, third-quarter preliminary adjusted earnings per share (EPS) are expected within its earlier-provided guidance of 35-36 cents at CER.The consensus estimate for adjusted EPS stands at 35 cents.
Sudden CEO Exit Keeps Investors on Tenterhooks
If the lackluster preliminary result was not enough, then the news surfacing about stepping down of the company’s current CEO Peer M. Schatz came as another shocker for the investment community, dragging the company’s share price down.
Per the news release, after serving QIAGEN for 27 years, Schatz decided to quit as the company CEO and the chairman of the management board. However, he will serve as a special advisor to the supervisory board.
It is also important to make a note that during his tenure, QIAGEN grew from generating $2 million of sales in 1993 to the current level of about $1.6 billion. The market capitalization also soared by more than 300 times in the period.
New Measures to Prioritize Resource Allocation
However, the company has also come up with plans to free up resources in order to focus on core profitable segments and invest in best growth opportunities. In this regard, the company recently entered into a new strategic collaboration with Illumina (ILMN) to advance the use of NGS technologies in clinical decision-making.
Under this alliance, the company introduced an orientation for its NGS-related operations that involves focusing on development activities as well as expanding its offering of universal NGS consumables solutions for use with any sequencer. Meanwhile, the company has decided to suspend its ongoing NGS-related instrument development activities.
Additionally, QIAGEN announced its initiatives of shifting its Global Operations organization to a regional manufacturing structure and expanding the scope of work at QIAGEN Business Services (QBS) centers in Wroclaw, Poland and Manila, Philippines. This should be completed by the end of 2019.
Shares of QIAGEN have underperformed the industry in the past three months. The stock has plunged 34%, wider than the industry’s 10.8% decline.
Zacks Rank & Key Picks
QIAGENcurrently has a Zacks Rank #4 (Sell).
A few better-ranked stocks in the broader medical space are Stryker SYK, Hill-Rom Holdings HRC and Syneos Health SYNH, all carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Stryker’s long-term earnings growth rate is expected to be 10.04%.
Hill-Rom Holdings’ long-term earnings growth rate is projected at 10.01%.
Syneos Health’s long-term earnings growth rate is estimated to be 10.5%.
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