QuidelOrtho (QDEL) Q3 Earnings Top Estimates, Margins Down
QuidelOrtho Corporation QDEL delivered adjusted earnings per share (EPS) of 90 cents in the third quarter of 2023, down by 51.4% year over year. The figure topped the Zacks Consensus Estimate by 100%.
The adjustments include expenses related to the amortization of intangibles, and acquisition and integration costs, among others.
GAAP loss per share for the quarter was 19 cents against the year-earlier EPS of 28 cents.
Revenues in Detail
QuidelOrtho registered revenues of $744 million in the third quarter, which decreased 5.1% year over year both on a reported basis and at constant exchange rate (CER). The figure surpassed the Zacks Consensus Estimate by 14.2%.
In the third quarter, Respiratory revenues were $185.4 million (down 21.5% on both reported basis and at CER), while Non-Respiratory revenues were $558.6 million (up 2% on both reported basis and at CER).
Segments in Detail
QuidelOrtho now derives revenues from four business units — Labs, Transfusion Medicine (TM), Point-Of-Care (POC) and Molecular Diagnostics (MDx).
In the third quarter, Labs revenues were $341.4 million, up 2% on both reported basis and at CER. This compares to our third-quarter projections of $288.4 million.
TM revenues were $163.9 million in the third quarter, up 0.5% and 0.4% on a reported basis and at CER, respectively. This compares to our third-quarter projections of $134.3 million.
POC revenues amounted to $233.1 million in the third quarter, reflecting a decline of 13.8% on both reported basis and at CER. This compares to our third-quarter projections of $218.6 million.
MDx revenues totaled $5.6 million in the third quarter, down 63.6% and 63.7% on a reported basis and at CER, respectively. This compares to our third-quarter projections of $9.6 million.
Geographical Distribution
Geographically, QuidelOrtho derives revenues from North America, Europe, the Middle East and Africa (EMEA), China and Other regions (which includes Latin America, Japan and other Asia-Pacific markets).
Revenues from North America amounted to $465.2 million, reflecting a decline of 10.1% and 9.7% on a reported basis and at CER, respectively. This compares to our third-quarter projections of $428.6 million.
EMEA revenues amounted to $74.5 million, reflecting an uptick of 1.1% on a reported basis but down 2.4% at CER. This compares to our third-quarter projections of $64.9 million.
Revenues from China amounted to $81.1 million, reflecting an improvement of 0.4% on a reported basis and 5.5% at CER. This compares to our third-quarter projections of $60.9 million.
Revenues from Other regions amounted to $123.2 million, reflecting an uptick of 10.3% on a reported basis and 7% at CER. This compares to our third-quarter projections of $96.6 million.
QuidelOrtho Corporation Price, Consensus and EPS Surprise
QuidelOrtho Corporation price-consensus-eps-surprise-chart | QuidelOrtho Corporation Quote
Margin Trend
In the quarter under review, QuidelOrtho’s gross profit declined 9.7% to $368.1 million. The gross margin contracted 251 basis points (bps) to 49.5%.
We had projected 49.9% of gross margin for the third quarter.
Selling, marketing and administrative expenses fell 4.9% to $194.1 million. Research and development expenses declined 4.9% year over year to $62.4 million. Adjusted operating expenses of $256.5 million decreased 4.9% year over year.
Adjusted operating profit totaled $111.6 million, reflecting an 18.9% decline from the prior-year quarter’s level. Adjusted operating margin in the third quarter contracted 257 bps to 15%.
Financial Position
QuidelOrtho exited third-quarter 2023 with cash and cash equivalents of $149.3 million compared with $178.6 million at the end of second quarter. Total debt (including short-term debt) at the end of third-quarter 2023 was $2.47 billion compared with $2.52 billion at the second-quarter end.
Cumulative net cash provided by operating activities at the end of third-quarter 2023 was $199.8 million compared with $715.9 million a year ago.
Guidance
QuidelOrtho has reiterated its financial outlook for 2023.
Total revenues are continued to be expected to lie in the range of $2.88 billion-$3.08 billion (down 29-24% a CER). The Zacks Consensus Estimate stands at $2.97 billion.
Non-respiratory revenues are continued to be expected between $2.27 billion and $2.31 billion (up 5-6.5% at CER from 2022 levels).
Respiratory revenues for the full year are continued to be expected to lie in the range of $610 million-$775 million. Per management, from the fourth quarter onward, QuidelOrtho will be including COVID-19 revenues as part of its overall respiratory business as it is in an endemic state.
Adjusted EPS is continued to be expected to lie between $4.85 and $5.30. The Zacks Consensus Estimate stands at $4.90.
Our Take
QuidelOrtho ended the third quarter of 2023 with better-than-expected results. An uptick in the company’s Non-Respiratory revenues was impressive. The company registered robust revenues from its Labs and TM segments and China and Other regions, which were encouraging. QuidelOrtho also recorded strong revenue growth in the EMEA region on a reported basis, which buoys optimism.
The company also recorded solid revenues from its Instrument and Recurring revenue categories, which were promising. The continued uptick in Sofia instruments and growth in QuidelOrtho’s integrated installed base and automation were encouraging.
In September, QuidelOrtho received a CLIA Waiver from the FDA, which applies to its new Sofia 2 SARS Antigen+ FIA (fluorescent immunoassay). The test, intended for prescription use only, can be used in CLIA-waived point-of-care settings. This looked promising for the stock.
However, dismal top-line and bottom-line results were disappointing. Lower Respiratory revenues during the quarter were also not promising. The decline in its POC and MDx segments and geographically in North America was discouraging. The decline in QuickVue revenues was also worrying. The contraction of both margins also does not bode well.
Zacks Rank and Key Picks
QuidelOrtho 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, DexCom, Inc. DXCM and Integer Holdings Corporation ITGR.
Abbott, carrying a Zacks Rank of 2 (Buy), reported third-quarter 2023 adjusted EPS of $1.14, beating the Zacks Consensus Estimate by 3.6%. Revenues of $10.14 billion outpaced the consensus mark by 3.6%. 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 6.8%.
DexCom reported third-quarter 2023 adjusted EPS of 50 cents, beating the Zacks Consensus Estimate by 47.1%. Revenues of $975 million surpassed the Zacks Consensus Estimate by 4%. It currently carries a Zacks Rank #2.
DexCom has a long-term estimated growth rate of 33.6%. DXCM’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 36.4%.
Integer Holdings reported third-quarter 2023 adjusted EPS of $1.27, beating the Zacks Consensus Estimate by 20.9%. Revenues of $404.7 million surpassed the Zacks Consensus Estimate by 8.7%. It currently carries a Zacks Rank #2.
Integer Holdings has a long-term estimated growth rate of 15.8%. ITGR’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 11.9%.
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