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Qiagen (QGEN) Down 8.7% Since Last Earnings Report: Can It Rebound?

Zacks Equity Research

It has been about a month since the last earnings report for Qiagen (QGEN). Shares have lost about 8.7% 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 the most recent earnings report in order to get a better handle on the important catalysts.

QIAGEN Misses Q2 Earnings Estimates, Lowers View

QIAGEN N.V.’s second-quarter 2019 adjusted earnings per share (EPS) were 33 cents, missing the Zacks Consensus Estimate by 2.9%. The figure remained flat year over year. At constant exchange rate or CER, the quarter’s adjusted EPS was 34 cents.

Revenues in Detail

Net sales at actual rates in the second quarter inched up 1% on a year-over-year basis to $381.6 million (up 5% at CER). However, the top line missed the Zacks Consensus Estimate by 11.4%.

Geographical Revenue Update

In the quarter under review, sales from the Americas (47% of revenues) totaled $181 million, up 1% on a reported basis (1% at CER). Revenues from Europe-Middle East-Africa (31% of revenues) declined 2% reportedly (up 5% at CER) to $118 million. Further, revenues from Asia-Pacific/Japan (22% of revenues) rose 8% year over year on a reported basis (up 12% at CER) to $83 million.

Segmental Details

As of the second quarter of 2019, QIAGEN has two major customer classes which are Molecular Diagnostics (that includes human healthcare including Precision Medicine and companion diagnostics) and Life Sciences (that includes Pharma and Academia/Applied Testing).

Molecular diagnostics (representing 49% of net sales) revenues were up 5% at CER to $188 million.

Life Sciences (51% of total revenues) reported revenues of $194 million, up 5% at CER. Sales derived from Applied Testing/Academia rose 5% at CER to $118 million. Pharma sales climbed 4% at CER in the second quarter to $76 million.

Operational Update

Gross profit in the quarter under review declined 3.1% to $245.9 million. Gross margin contracted 283 basis points (bps) to 64.4%.

Adjusted operating income (excluding items like acquisition-related intangible amortization) rose 8.6% year over year to $68.9 million in the second quarter. Adjusted operating margin expanded 124 bps to 18%.

Financial Update

QIAGEN exited the second quarter of 2019 with cash and cash equivalents of $624.6 million, up from $552.9 million at the end of the first quarter. Year to date, net cash provided by operating activities was $82.5 million compared with $118 million a year ago. Moreover, the company reported year-to-date free cash flow of $51.5 million compared with $94.1 million a year ago.

As of Jun 19, 2019, QIAGEN had repurchased approximately $180 million of shares.

2019 Guidance

QIAGEN has lowered its 2019 guidance. Total net sales growth is expected in the range of about 5-6% at CER, compared to the earlier projection of 7-8% at CER. The Zacks Consensus Estimate for 2019 revenues is pegged at $1.56 billion.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates revision. The consensus estimate has shifted -8.45% due to these changes.

VGM Scores

Currently, Qiagen has an average Growth Score of C, however its Momentum Score is doing a lot better with an A. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. 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 this revision indicates a downward shift. It's no surprise Qiagen has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.



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