Why Is Qiagen (QGEN) Down 4.8% Since Last Earnings Report?
A month has gone by since the last earnings report for Qiagen (QGEN). Shares have lost about 4.8% 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 Q2 Earnings and Revenues Top, '23 View Slashed
QIAGEN’s second-quarter 2023 adjusted earnings per share 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 earnings per share 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.
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).
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.
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.
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.
Life Sciences (47.5% of total revenues) reported revenues of $235 million, down 10% on a reported basis (down 9% at CER).
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.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates review.
The consensus estimate has shifted -8.77% due to these changes.
VGM Scores
At this time, Qiagen has a poor Growth Score of F, however its Momentum Score is doing a lot better with a B. Charting a somewhat similar path, 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 D. 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 these revisions 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.
Performance of an Industry Player
Qiagen belongs to the Zacks Medical - Biomedical and Genetics industry. Another stock from the same industry, Alnylam Pharmaceuticals (ALNY), has gained 8.1% over the past month. More than a month has passed since the company reported results for the quarter ended June 2023.
Alnylam reported revenues of $318.75 million in the last reported quarter, representing a year-over-year change of +41.8%. EPS of -$2.21 for the same period compares with -$2.29 a year ago.
Alnylam is expected to post a loss of $1.69 per share for the current quarter, representing a year-over-year change of +49.1%. Over the last 30 days, the Zacks Consensus Estimate remained unchanged.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Alnylam. Also, the stock has a VGM Score of D.
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