A month has gone by since the last earnings report for Bruker (BRKR). Shares have lost about 8.1% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Bruker 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 drivers.
Bruker’s Q4 Earnings Miss Estimates, Revenues Beat
Bruker delivered adjusted earnings per share of 53 cents in the fourth quarter of 2019, down 1.9% year over year. Moreover, the figure lagged the Zacks Consensus Estimate by 8.6%.
GAAP earnings per share for the quarter was 44 cents a share, marking a 12% decline from the year-earlier figure.
Full-year adjusted earnings per share were $1.57, reflecting a 12.1% increase from the year-earlier figure of $1.40. The metric lagged the Zacks Consensus Estimate by 3.7%.
Notably, Bruker released preliminary top-line results for fourth-quarter and 2019 on Feb 18, 2020. The company’s final earnings announcement was pending due to an income tax-related internal investigation.
Revenues in Detail
Bruker registered revenues of $599.9 million in the fourth quarter, up 8.4% year over year. Further, the top line surpassed the Zacks Consensus Estimate by 2.4%.
Excluding a positive impact of 4.3% from acquisitions and a 1.1% negative impact from changes in foreign currency rates, the company recorded organic revenue growth of 5.2% and growth of 9.5% at constant exchange rate (CER) year over year.
Geographically, the United States witnessed 5.9% growth in the reported quarter. Also, revenues in the Asia Pacific grew 22.4%, whereas the Other category’s revenues rose 1.2%. Meanwhile, Europe revenues declined 0.4% year over year.
Full-year revenues were $2.07 billion, reflecting a 9.3% increase from the year-ago period. Revenues beat the Zacks Consensus Estimate by 0.7%.
Segments in Details
Bruker reports results under three segments — BSI Life Science (comprising BioSpin and CALID), BSI NANO and BEST.
In the fourth quarter, its BioSpin Group revenues grew 10.6% from the year-ago quarter, fuelled by the acceptance of a 1.1-gigahertz NMR system. CALID revenues were up 14.7% year over year, fuelled by strong growth in all major CALID areas, including life science mass spec solutions, microbiology and FTIR/NIR molecular spectroscopy tools. Total BSI Life Science revenues were $375.6 million, up 12.5% year over year.
Revenues in the NANO group rose 2.6%, dented by a steep year-over-year decline in the company’s semiconductor metrology business and weaker results in some of the NANO industrial research businesses.
Organic revenue growth and revenue growth at CER of the BSI segment (including BSI Life Science and BSI Nano Segments) were 5.8% and 10.3% year over year, respectively.
In the fourth quarter, the company’s BEST segment’s revenues were $57.7 million, indicating an improvement of 3.8% year over year. However, organically, the BEST segment declined 0.5% year over year, net of intercompany eliminations. At CER, the segment rose 2.8%.
In the quarter under review, Bruker’s gross profit rose 8.6% to $296.3 million. Gross margin expanded 11 basis points (bps) to 49.4%.
Meanwhile, selling, general & administrative expenses grew 11.1% to $130.3 million. Research and development expenses went up 4.2% year over year to $46.7 million. The adjusted operating expenses escalated to $177 million, up 9.2% year over year.
Adjusted operating profit totaled $119 million, reflecting a 7.8% increase from the prior-year quarter. However, adjusted operating margin in the fourth quarter dipped 11 bps to 19.9%.
Bruker exited the year with cash and cash equivalents, and short-term investments of $684.9 million compared with $322.4 million at the end of 2018. Long-term debt at the end of 2019 was $812.8 million compared with $322.6 at the end of 2018.
At the end of 2019, cash flow from operating activities was $213.4 million compared with $239.7 million at the end of 2018.
2020 Guidance Update
Bruker refrained from providing any guidance for 2020 due to the challenging business conditions created by the coronavirus pandemic. The company expects to provide a business update on its first-quarter 2020 earnings conference call in early May 2020.
Bruker anticipates that revenues and earnings will be lower in the first quarter of 2020 than in the prior-year quarter. Its second-quarter 2020 results are expected to be significantly affected by COVID-19-related disruptions to its operations, customer operations, and global supply chains and logistics.
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 -68.63% due to these changes.
At this time, Bruker has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. 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.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Bruker has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.
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