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QIAGEN (QGEN) Q2 Earnings Top Estimates, Margins Decline

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QIAGEN N.V.’s QGEN second-quarter 2021 adjusted earnings per share (EPS) were 67 cents (66 cents at constant exchange rate or CER), up 21.8% year over year (up 20% at constant exchange rate or CER). Moreover, the figure surpassed the Zacks Consensus Estimate by 1.5%.

Notably, the bottom line exceeded the company’s second-quarter guidance of 62-64 cents at CER.

The adjustment excludes the impact of certain non-recurring items like business integration, acquisition, restructuring-related expenses, and purchased intangibles amortization expenses, among others.

GAAP EPS for the quarter was 52 cents per share, improving significantly from the year-ago growth per share of 38 cents, reflecting an uptick of 36.8%.

Revenues in Detail

Net sales in the second quarter rose 27.9% on a year-over-year basis to $567.3 million (up 24% at CER). Also, the top line exceeded the Zacks Consensus Estimate by 0.9%. Top-line growth also exceeded the company’s second-quarter expectation of at least 20% year-over-year growth at CER.

Sales growth was recorded on improvements in non-COVID areas of the portfolio and trend improvement in the company’s core business.

Geographical Revenue Update

In the quarter under review, sales from the Americas (45% of sales) totaled $257 million, up 45% on a reported basis (up 44% at CER).

QIAGEN N.V. Price, Consensus and EPS Surprise

QIAGEN N.V. Price, Consensus and EPS Surprise
QIAGEN N.V. Price, Consensus and EPS Surprise

QIAGEN N.V. price-consensus-eps-surprise-chart | QIAGEN N.V. Quote

Revenues from Europe, Middle East and Africa (36% of sales) rose 23% reportedly (up 15% at CER) to $202 million.

Further, revenues from Asia-Pacific/ Japan (19% of sales) rose 10% year over year on a reported basis (up 4% at CER) to $109 million.

Segmental Details

As of the second quarter of 2021, QIAGEN had two major customer classes – Molecular Diagnostics and Life Sciences.

Molecular Diagnostics (representing 48% of net sales) revenues were up 33% on a reported basis (up 28% at CER) to $272 million.

Life Sciences (20% of total revenues) reported revenues of $296 million, up 24% on a reported basis (up 20% at CER).

Operational Update

Adjusted gross profit in the quarter under review rose 24.8% to $386.9 million. However, adjusted gross margin contracted 171 basis points (bps) to 68.2% due to a 35.3% rise in total cost of sales (adjusting for acquisition-related intangible amortization) to $180.4 million.

Sales and marketing expenses of QIAGEN rose 16.9% to $110.4 million year over year. Research and development expenses increased 63.9% year over year to $52.2 million whereas general and administrative expenses rose 29.9% year over year to $31 million.

Adjusted operating income (excluding items like acquisition-related intangible amortization, restructuring and integration, asset impairment) rose 20.9% year over year to $193.4 million in the second quarter. Adjusted operating margin however contracted 198 bps to 34.1%.

Financial Update

QIAGEN exited second-quarter 2021 with cash and cash equivalents, and short-term investments of $898 million, up from $791.7 million at the end of first-quarter 2021. Long-term debt was $1.94 billion in second-quarter 2021 compared with $1.93 billion in the prior quarter.

Cumulative net cash flow from operating activities at the end of second-quarter 2021 was $285 million compared with $150.9 million a year ago.

Guidance

In July ,QIAGEN updated its full-year view.

Full-year net sales are now expected to grow at least 12% at CER (a significant decline from earlier outlook of CER growth of 18-20%). Adjusted EPS for 2021 is now expected to be minimum $2.42 at CER (prior outlook of about $2.42-2.46 at CER).

Considering the Jun 30, 2021 exchange rate, currency movements against the U.S. dollar are still expected to create a positive impact of about 2-3 percentage points on net sales growth at actual rates for full-year 2021. Further, 2-3 cents of positive impact are expected on adjusted EPS.

For the third quarter, the company expects to report net sales of $483.8 million at CER (flat year over year). Adjusted EPS is expected to be about 52-53 cents at CER compared with 58 cents in the year-ago quarter.

Our Take

QIAGEN exited the second quarter of 2021 with better-than-expected revenues and earnings. It registered revenue growth across all geographies and both its operating segments in the second quarter.

However, a faster-than-expected vaccination uptake has led to a reduction in demand for COVID-19 testing. Taking this into consideration, earlier this month, the company had significantly reduced its 2021 guidance to reflect the COVID-19 testing trends for the second half of 2021. A weak margin scenario is an added concern.

Zacks Rank and Key Picks

QIAGEN currently carries a Zacks Rank #5 (Strong Sell).

Some better-ranked stocks in the broader medical space that have already announced their quarterly results are Boston Scientific Corporation BSX, West Pharmaceutical Services, Inc. WST and Laboratory Corporation of America Holdings LH, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Boston Scientific reported second-quarter 2021 adjusted EPS of 40 cents, which beat the Zacks Consensus Estimate by 8.1%. Second-quarter revenues of $3.08 billion outpaced the consensus mark by 4.4%.

West Pharmaceutical reported second-quarter 2021 adjusted EPS of $2.46, which surpassed the Zacks Consensus Estimate by 41.4%. Second-quarter revenues of $723.6 million outpaced the Zacks Consensus Estimate by 8.7%.

LabCorp reported second-quarter 2021 adjusted EPS of $6.13, surpassing the Zacks Consensus Estimate by 8.7%. Revenues of $3.84 billion exceeded the Zacks Consensus Estimate by 6.9%.


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