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Bio-Rad (BIO) Beats Q1 Earnings Estimates, Withdraws View

Zacks Equity Research

Bio-Rad Laboratories, Inc. BIO posted first-quarter 2020 adjusted earnings per share (EPS) of $1.91, which surpassed the Zacks Consensus Estimate by 36.4%. Moreover, the bottom line rose 15.8% from the prior-year quarter.

The quarter’s adjustments eliminate the impacts of certain non-recurring items like asset amortization costs, legal charges, restructuring benefits and acquisition-related one-time benefits.

On a GAAP basis, the company registered earnings of $22.72 per share in the quarter compared with $28.74 a year ago, down 20.9%.

Revenues in Detail

Bio-Rad’s revenues of $571.6 million in the quarter surpassed the Zacks Consensus Estimate by 4.7%. Moreover, revenues inched up 3.2% from the year-ago quarter (up 4.3% at constant exchange rate or CER).

BioRad Laboratories Inc Price, Consensus and EPS Surprise

 

BioRad Laboratories Inc Price, Consensus and EPS Surprise

BioRad Laboratories Inc price-consensus-eps-surprise-chart | BioRad Laboratories Inc Quote


Bio-Rad’s Asia business was the first to witness the coronavirus pandemic-led impact on its first-quarter revenues. Toward the end of the quarter, the impact was seen in the United States and Europe as well.

Segmental Analysis

Sales at the Life Sciences segment in the first quarter totaled $227.2 million, up 5.3% year over year and 6% at CER. The quarter saw double-digit growth in Droplet Digital PCR and Food Safety products. The reported growth was primarily driven by double-digit growth in Droplet Digital PCR, Gene Expression, Food Science, and Antibody products. Geographically, the company’s quarterly growth was led by Asia and Europe. The company also recorded solid growth in Americas, excluding the Process Media produce line.

However, the segment’s growth was offset by softer academic research demand and a tough comparison to Process Media produce line’s sales last year.

Net sales at the Clinical Diagnostics segment totaled $340.3 million, up 1.9% on a year-over-year basis and 3.2% at CER. The upside was primarily driven by solid growth in Quality Controls and Blood Typing products. Geographically, growth was led by sales in Europe and Asia.

Margins

In the quarter under review, Bio-Rad’s gross profit rose 1.8% to $317.4 million. However, gross margin contracted 76 basis points (bps) to 55.5%. Per the company, adjusted gross margin was 55.9%, expanding 30 bps.

Adjusted operating expenses were $242.9 million in the first quarter, down 4.8% year over year. Adjusted operating profit totaled $74.4 million, reflecting a 31.4% surge from the prior-year quarter. Moreover, adjusted operating margin in the first quarter expanded 279 bps to 13%.

Company-adjusted operating margin was 13.9%, expanding 340 bps year over year.

Financial Update

Bio-Rad exited the first quarter with cash and cash equivalents (including short-term investments) of $1.04 billion compared with $1.12 billion at the end of 2019.

At the end of the quarter under review, cash flow from operating activities was $62.8 million compared with $42.9 million in the year-ago quarter.

2020 Guidance

Given the economic impact of the coronavirus pandemic and uncertainties regarding the duration of the same, Bio-Rad has withdrawn its annual guidance for 2020.

However, the company expects second-quarter sales decline of 10-5%.

Our Take

Bio-Rad exited the first quarter of 2020 with better-than-expected results. The company witnessed solid revenue growth at both operating segments despite the negative impacts of the pandemic. Further, strength in many of its key product lines across major geographic regions buoys optimism.

The uptick in core PCR and Droplet Digital PCR product revenues resulted from robust demand due to COVID-19 testing and related research. Further, the FDA’s emergency use authorization for the Droplet Digital PCR COVID-19 test kit buoys optimism. Expansion of the company’s adjusted operating margin instils optimism.

However, decline in the company’s diabetes and immunology product lines sales due to lower non-critical hospital and clinic visits is concerning. Further, a fall in routine led testing and elective surgeries impacted diagnostic group revenues. The withdrawal of the full-year guidance and projection of a sales decline for the second quarter are concerning as well.

Zacks Rank and Stocks to Consider

Bio-Rad currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader medical space are Aphria Inc. APHA, Biogen Inc. BIIB and Eli Lilly and Company LLY.

Aphria reported third-quarter fiscal 2020 adjusted EPS of 2 cents, comparing favorably with the Zacks Consensus Estimate of a loss of 4 cents. Net revenues of $64.4 million outpaced the consensus estimate by 14.6%. The company carries a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Biogen currently carries a Zacks Rank #2. It reported first-quarter 2020 adjusted EPS of $9.14, surpassing the Zacks Consensus Estimate by 18.1%. Revenues of $3.53 billion outpaced the consensus mark by 3.2%.

Eli Lilly delivered first-quarter 2020 EPS of $1.75, outpacing the Zacks Consensus Estimate by 12.9%. Revenues of $145.3 million surpassed the consensus estimate by 6.3%. The company currently sports a Zacks Rank #1.

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