Qiagen (QGEN) Down 3.5% Since Last Earnings Report: Can It Rebound?

It has been about a month since the last earnings report for Qiagen (QGEN). Shares have lost about 3.5% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Qiagen due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

QIAGEN Beats Earnings in Q3, Molecular Diagnostics Unit Strong

QIAGEN's third-quarter 2018 adjusted earnings per share (EPS) came in at 35 cents, up 9.4% year over year. The figure beat the Zacks Consensus Estimate of 33 cents by 6.1%. At constant exchange rate or CER, the company reported adjusted earnings of 36 cents.

Revenues in Detail

Net sales at actual rates in the third quarter grew 3.8% on a year-over-year basis to $377.9 million (6.5% at CER). Also, the top line surpassed the Zacks Consensus Estimate by 1.1%.

Sales from the Americas (49% of revenues) grew 9% at CER and revenues from Europe-Middle East-Africa (30%) increased 1%. Further, revenues from Asia-Pacific/Japan (21%) rose 11% year over year.

Segments in Detail

QIAGEN primarily generates revenues through Molecular Diagnostics, Applied Testing, Pharma and Academia, which represented 50%, 9%, 19% and 22% of net sales, respectively, in the reported quarter.

Molecular diagnostics sales were up 9% at CER. Sales derived from Applied Testing rose 1% at CER. Pharma sales rose 5% at CER in the third quarter and Academia sales improved 5% on growing demand.

Operational Update

Adjusted operating income (excluding items like restructuring charges, business integration, acquisition-related costs, litigation costs and the amortization of intangible assets acquired in business combinations) increased 7.9% year over year to $105.6 million in the third quarter. Moreover, adjusted operating margin expanded 100 basis points to 27.9%.

Financial Update

QIAGEN exited the third quarter with cash and cash equivalents of $599.8 million, down from $674.4 million at the end of the second quarter of 2018. Net cash provided by operating activities was $249 million for the nine months ending Sep 30, 2018, compared with $210.7 million a year ago. Moreover, the company reported free cash flow of $176.7 million for the first nine months compared with $146.1 million in the year-ago period.

QIAGEN announced a new commitment in January to return $200 million to shareholders via open-market repurchases, after returning $300 million to shareholders by the end of 2017. Notably, shares are being repurchased on the Frankfurt Stock Exchange. Through October 2018, the company has bought back a total of 2.7 million shares on the Frankfurt Stock Exchange for EUR 85.0 million (approximately $97 million at current exchange rates).

2018 Guidance

QIAGEN has maintained its 2018 guidance for total net sales growth at about 6-7% at CER. This guidance considers a drop in U.S. HPV test sales to have an adverse impact of around 1% on total net sales growth in 2018. Further, sales of about $7 million during the second half of 2018 from the acquisition of STAT-Dx was taken into account. The Zacks Consensus Estimate for 2018 revenues is pegged at $1.52 billion.

However, the company has raised its adjusted EPS guidance to $1.33-$1.34 at CER compared with $1.31-$1.33 at CER provided previously. Our consensus estimate for 2018 earnings of $1.33 is at the low end of the guided range.

Further, currency movements are expected to have a negative impact on 2018 net sales growth of up to 1% and an adverse impact of about 2 cents per share on adjusted EPS.

The company also provided the financial guidance for the fourth quarter of 2018. Net sales are expected to grow around 6-7% at CER. Adjusted EPS is expected at 39-40 cents at CER on an underlying basis. The Zacks Consensus Estimate for earnings stands at 43 cents per share, above the company’s guided range. Our consensus estimate for revenues is pegged at $424.5 million.

Further, currency movements are expected to have a negative impact on fourth-quarter 2018 net sales growth of up to 3-4% and up to a penny on adjusted EPS.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -5.72% due to these changes.

VGM Scores

Currently, Qiagen has an average Growth Score of C, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Qiagen has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

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