QIAGEN (QGEN) Q2 Earnings and Revenues Top, '23 View Slashed
QIAGEN N.V.’s QGEN second-quarter 2023 adjusted earnings per share (EPS) were 51 cents (52 cents at a constant exchange rate or CER), in line with the prior-year period. The figure surpassed the Zacks Consensus Estimate by a penny.
The adjustment excludes the impact of certain non-recurring items like business integration, acquisition and restructuring-related expenses, purchased intangible amortization expenses and non-cash interest expense charges, among others.
The GAAP EPS for the quarter was 35 cents, down 16.7% year over year.
Revenues in Detail
Net sales in the second quarter fell 4% year over year to $494.9 million (down 4% at CER). However, the top line beat the Zacks Consensus Estimate by 0.2%. Sales at CER were $497 million, ahead of the outlook of at least $490 million.
Second-quarter sales were driven by 9% CER growth in the non-COVID-19 portfolio to $457 million as well as 10% CER sales growth in recurring consumables and related revenues.
QIAGEN N.V. Price, Consensus and EPS Surprise
QIAGEN N.V. price-consensus-eps-surprise-chart | QIAGEN N.V. Quote
Geographical Revenue Analysis
In the quarter under review, sales from the Americas (53% of sales) totaled $263 million, up 4% year over year (up 4% at CER). Our model projected a year-over-year decline of 2.9% in this region.
The CER improvement was led by higher sales in the United States and from QuantiFERON-TB, which outweighed reduced pandemic sales. CER sales growth in the non-COVID-19 portfolio was supported by gains in the United States, Brazil and Mexico compared to the year-ago period.
Revenues from Europe, the Middle East and Africa (31% of sales) fell 6.2% reportedly (down 7% at CER) to $151 million. This was wider than our model’s projected decline of 1.6%.
The overall CER sales decline resulted from a higher level of pandemic testing demand in the second quarter of 2022.
Revenues from Asia-Pacific/Japan (16% of sales) fell 20.6% year over year on a reported basis (down 17% at CER) to $81 million. Our model’s projection was a decline of 11.6%.
Per the company, overall sales in this region were significantly down compared with very strong results in the prior-year quarter.
Segmental Details
As of the second quarter of 2023, QIAGEN had two major customer classes — Molecular Diagnostics and Life Sciences.
Molecular Diagnostics’ (representing 52.5% of net sales) revenues were up 2% on a reported basis (up 2% at CER) to $260 million. Our model projected a year-over-year decline of 1% from this segment.
Life Sciences (47.5% of total revenues) reported revenues of $235 million, down 10% on a reported basis (down 9% at CER). Our model’s projection was a decline of 7.4%.
Operational Update
The adjusted gross profit (excluding the amortization of acquisition-related intangibles) in the quarter under review fell 5.2% to $328.2 million.
Meanwhile, the adjusted gross margin contracted 82 basis points (bps) to 66.3% despite a 1.6% decline in the cost of sales (excluding amortization) to $166.6 million.
Sales and marketing expenses of QIAGEN fell 2.2% year over year to $116.3 million. R&D expenses of $49.9 million were almost similar to the prior year’s quarter. G&A expenses fell 10.3% year over year to $29 million.
The adjusted operating income (excluding items like acquisition-related intangible amortization, restructuring and integration and others) declined 8.3% year over year to $132.8 million in the second quarter. Meanwhile, the adjusted operating margin contracted 126 bps to 26.8%.
Financial Update
QIAGEN exited the second quarter of 2023 with cash and cash equivalents and short-term investments of $1.33 billion compared with $1.42 billion as of Dec 31, 2022. The long-term debt was $1.39 billion at the end of the second quarter of 2023 compared with $1.47 billion at the end of 2022.
The cumulative net cash provided by operating activities at the end of the second quarter was $183.4 million compared with $379.4 million in the year-ago period.
Guidance
QIAGEN provided revised guidance for 2023.
Full-year net sales are expected to be nearly $1.97 billion at CER compared with the previously issued guidance of at least $2.05 billion. The reduced outlook considers the significant drop in COVID-19 test demand and volatility in large-scale customer bulk orders in the OEM (Original Equipment Manufacturer) business, which impacts both COVID-19 and non-COVID-19 sales results.
Sales growth from non-COVID-19 product groups is now expected to be at least 8% at CER (previously double-digit CER sales growth), driven by ongoing solid consumables demand across the portfolio.
The Zacks Consensus Estimate for 2023 revenues is pegged at $2.04 billion.
The adjusted EPS for 2023 is expected at about $2.07 at CER, down from the earlier outlook of at least $2.10 at CER. The Zacks Consensus Estimate for adjusted EPS is pegged at $2.11.
For the third quarter of 2023, the company expects net sales of at least $465 million at CER. The Zacks Consensus Estimate for the same is pegged at $519.5 million.
The adjusted EPS is expected to be at least 48 cents at CER. The Zacks Consensus Estimate for the adjusted EPS is pegged at 53 cents.
Our Take
QIAGEN ended the second quarter of 2023 with earnings and revenues beating by a narrow margin. The QIAGEN Digital Insights business drove performance in the second quarter with more than 20% CER sales growth. QuantiFERON-TB test quarterly sales exceeded $100 million for the first time, fueled by the ongoing conversion of latent TB testing in all regions from the traditional skin test.
CER growth in the consumable portfolio, with high recurring revenues across all customer classes, appears promising. Amid an uncertain macro environment and a significant reduction in COVID-19 testing, QIAGEN delivered the top and bottom lines ahead of the outlook (CER net sales of at least $490 million and adjusted EPS of at least $0.50 CER) in the quarter under review. This is likely to bode well for the stock.
Meanwhile, both margins contracted in the quarter despite a decline in expenses. Reduced guidance for the full year is discouraging.
Zacks Rank and Key Picks
QIAGEN currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the broader medical space that have announced quarterly results are Abbott Laboratories ABT, Elevance Health, Inc. ELV and Intuitive Surgical, Inc. ISRG.
Abbott, carrying a Zacks Rank of 2 (Buy), reported a second-quarter 2023 adjusted EPS of $1.08, beating the Zacks Consensus Estimate by 3.8%. Revenues of $9.98 billion outpaced the consensus mark by 2.9%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Abbott has a long-term estimated growth rate of 5.1%. ABT’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 12.4%.
Elevance Health reported a second-quarter 2023 adjusted EPS of $9.04, beating the Zacks Consensus Estimate by 2.5%. Revenues of $43.38 billion surpassed the Zacks Consensus Estimate by 4.5%. It currently carries a Zacks Rank #2.
Elevance Health has a long-term estimated growth rate of 12.1%. ELV’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 2.8%.
Intuitive Surgical reported a second-quarter 2023 adjusted EPS of $1.42, beating the Zacks Consensus Estimate by 7.6%. Revenues of $1.76 billion surpassed the Zacks Consensus Estimate by 1.4%. It currently carries a Zacks Rank #2.
Intuitive Surgical has a long-term estimated growth rate of 14.5%. ISRG’s earnings surpassed estimates in three of the trailing four quarters and missed the same once, the average surprise being 4.2%.
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