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QIAGEN (QGEN) Beats on Q4 Earnings and Revenues, Issues View

Zacks Equity Research

QIAGEN N.V.'s QGEN fourth-quarter 2017 adjusted earnings per share (EPS) came in at 43 cents, excluding an after-tax charge of $104.4 million or 45 cents per share as an impact of U.S. tax reform. Notably, roughly $94.9 million or 41 cents per share of this charge included non-cash items that were derived from the revaluation of deferred taxes and other tax provisions. Reported loss came in at 18 cents per share.

The adjusted EPS figure was up 10.3% year over year. The figure beat the Zacks Consensus Estimate by a penny. At constant exchange rate or CER, the company reported adj

Full-year adjusted EPS came in at $1.27 compared with $1.11 in the year-ago quarter. The figure also surpassed the Zacks Consensus Estimate of $1.25.

Revenues in Detail

Net sales at actual rates in the fourth quarter grew 8.3% on a year-over-year basis to $396.9 million (5% at CER). Also, the top line surpassed the Zacks Consensus Estimate of $394.5 million.

 

Qiagen N.V. Price, Consensus and EPS Surprise

 

Qiagen N.V. Price, Consensus and EPS Surprise | Qiagen N.V. Quote

 

In the full year, net sales grew 6% (same at CER) to $1.42 billion from the year-ago quarter’s $1.34 billion. The figure surpassed the Zacks Consensus Estimate of $1.41 billion.

Region-wise, sales from the Americas (44% of revenues) grew 7% at CER, while revenues from Europe-Middle East-Africa (34%) and Asia-Pacific/Japan (22%) increased 6% and 1%, respectively. Sales in the top seven emerging markets (18%) exhibited growth of 9% year over year at CER in the quarter under review.

Segments in Detail

QIAGEN primarily generates revenues from Molecular Diagnostics, Applied Testing, Pharma and Academia, which represented 49%, 10%, 18% and 23% of net sales, respectively, during the reported quarter.

Molecular diagnostics sales were up 4% at CER. Sales derived from Applied Testing rose 9% at CER. Pharma sales rose 9% at CER in the fourth quarter and Academia sales improved 5% backed by growing demand.

Operational Update

Adjusted operating income (excluding restructuring charges) increased 8% year over year to $121.7 million in the fourth quarter. Also, adjusted operating margin expanded 230 basis points to 30.7%. 

Financial Update

QIAGEN exited full-year 2017 with cash and cash equivalents of $657.7 million, down from $671.8 million in the preceding quarter. Net cash from operating activities in 2017 was $286.8 million, down from $341.6 million a year ago. Moreover, the company reported full-year 2017 free cash flow of $196.7 million compared with $267.1 million in the year-ago period.

QIAGEN has announced a new commitment to return $200 million to shareholders via open-market repurchases, after returning $300 million to shareholders by the end of 2017. Notably, shares will be repurchased on the Frankfurt Stock Exchange.

2018 Guidance

For 2018, organic growth in net sales is expected to be 6-7% at CER (up from 5% in 2017), excluding business portfolio changes in as well as the acquisition of STAT-Dx (launch planned for second-half 2018). The company expects total 2018 adjusted net sales to be $1.42 billion. The Zacks Consensus Estimate for net sales is pegged at $1.52 billion. QIAGEN expects underlying growth in adjusted EPS to approximately $1.38-$1.40 at CER. This is however expected to decline to $1.31-$1.33 due to dilution of about 3 cents at CER owing to the U.S. tax reform and an adjusted tax rate of about 20-21% for 2018, anticipated dilution of about 5 cents for commercialization and development of the QIAstat-Dx system, and accretion of about a penny per share from the $200 million share repurchase plan. The Zacks Consensus Estimate for adjusted earnings is pegged at $1.37.

For first-quarter 2018, adjusted net sales growth is expected at $308.3 million. The Zacks Consensus Estimate for net sales stands at $339 million, which is above the guided range. Moreover, first-quarter 2018 adjusted EPS is projected at 23 cents. The Zacks Consensus Estimate for adjusted earnings is pegged at 26 cents, above the guided range.

Our Take

QIAGEN ended the fourth quarter on a solid note. We are impressed with year over year growth across all segments. The company also delivered a strong performance with respect to operating margin. Meanwhile, its commitment to return more to shareholders through increased repurchases reflects its solid cash position. The market is also looking forward to the recently inked agreement of QIAGEN to buy a privately-held developer of the next generation of multiplex diagnostics for fully integrated and one-step molecular analysis of certain well-known syndromes using a novel system based on real-time proven QIAGEN chemistries and PCR technology.

On the flip side, a competitive landscape and strong reliance on collaborations remain major overhangs.

Zacks Rank & Key Picks

QIAGEN has a Zacks Rank #4 (Sell).

A few better-ranked stocks that reported solid results this earnings season are PetMed Express PETS, PerkinElmer PKI and Accuray ARAY. While PetMed sports a Zacks Rank #1 (Strong Buy), PerkinElmer and Accuray carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

PetMed recently reported third-quarter fiscal 2018 results with adjusted earnings per share of 44 cents rising 88.3% year over year. Revenues in the reported quarter rose 13.7% on a year-over-year basis, to $60.1 million.

PerkinElmer reported fourth-quarter 2017 adjusted earnings per share of 97 cents. Adjusted revenues were approximately $641.6 million, up from $567 million in the year-ago quarter.

Accuray reported a loss of 6 cents per share in second-quarter fiscal 2018, 5 cents narrower than the year-ago figure. Total revenues improved 15% year over year to $100.3 million.

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