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Bio-Rad (BIO) Q4 Earnings & Revenues Fall Short of Estimates

Zacks Equity Research

Bio-Rad Laboratories, Inc. BIO posted fourth-quarter 2019 adjusted earnings per share (EPS) of $2.32, which lagged the Zacks Consensus Estimate by 5.7%. However, the bottom line rose 11% from the prior-year quarter.

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

On a GAAP (reported) basis, the company registered an earning of $18.31 per share in the quarter against a loss of $27.73 per share a year ago.

Full-year adjusted EPS was $7.06, reflecting a 21.5% rise from the year-ago period. However, the company lagged the Zacks Consensus Estimate of $7.20.

Bio-Rad Laboratories, Inc. Price, Consensus and EPS Surprise

 

Bio-Rad Laboratories, Inc. Price, Consensus and EPS Surprise

Bio-Rad Laboratories, Inc. price-consensus-eps-surprise-chart | Bio-Rad Laboratories, Inc. Quote

Revenues in Detail

Bio-Rad’s revenues of $624.4 million in the quarter missed the Zacks Consensus Estimate by 1.9%. However, revenues inched up 1.2% from the year-ago quarter (up 2.3% at constant exchange rate or CER).

Full-year revenues were $2.31 billion, reflecting a 0.9% increase from the year-ago period. However, revenues lagged the Zacks Consensus Estimate by 0.4%.

Solid demand for many of Bio-Rad’s key product lines and growth in the Americas and Europe led to the uptick in revenues.

Segmental Analysis

Sales at the Life Sciences segment in the fourth quarter totaled $242 million, up 1% year over year and up 1.8% at CER. The quarter registered double-digit growth in Droplet Digital PCR and Food Safety products. The company witnessed strong demand within Process Media, Droplet Digital PCR and Food Safety product lines. Geographically, the company’s growth was led by North America and Europe. However, sales were adversely affected by a cyber-attack in December, with the major effect witnessed in Asia. This brought down the company’s total quarterly revenues.

Net sales at the Clinical Diagnostics segment totaled $379 million, up 1.6% on a year-over-year basis and up 2.8% at CER. The upside was primarily driven by solid growth in Quality Controls, Diabetes, Autoimmune, and Blood Typing products across Asia and the Americas.

Margins

In the quarter under review, Bio-Rad’s gross profit declined 0.6% to $330.4 million. Further, gross margin contracted 100 basis points (bps) to 52.9%.

Adjusted operating expenses were $271.2 million in the fourth quarter, up 1.5% year over year. Adjusted operating profit totaled $59.2 million, reflecting a 9.6% dip from the prior-year quarter. Moreover, adjusted operating margin in the fourth quarter dipped 113 bps to 9.5%.

However, per the company, adjusted gross margin was 54.1%, contracting 130 bps. Additionally, adjusted operating margin was flat year over year at 14.3%.

Financial Update

Bio-Rad exited the year with cash and cash equivalents (including short-term investments) of $1.12 billion compared with $850.4 million at the end of 2018.

At the end of 2019, cash flow from operating activities was $457.9 million compared with $285.5 million at the end of 2018.

2020 Guidance

For 2020, the company expects revenue growth of 4.5-5.3% (CER). The Zacks Consensus Estimate for yearly revenues is pegged at $2.42 billion.

The company anticipates its Life Science and Clinical Diagnostics segments to register growth of 7-8% and 3-4% at CER, respectively.

Adjusted operating margin is estimated to be 13.8-14.3%.

Our Take

Bio-Rad exited 2019 on a disappointing note, with earnings and revenues missing estimates. However, the company witnessed solid revenue growth at both operating segments despite the negative impacts of a cyber-attack. Further, strength in many of its key product lines across major geographic regions buoys optimism. The uptick in demand for the fully-integrated QX ONE system (in its Life Science business arm) after its launch in the fourth quarter buoys optimism.

However, escalating costs and expenses are putting pressure on the company’s margins.

Zacks Rank and Stocks to Consider

Bio-Rad currently carries a Zacks Rank #4 (Sell).

Some better-ranked stocks, which reported solid results this earnings season, are Stryker Corporation SYK, Accuray Incorporated ARAY and ResMed Inc. RMD.

Stryker delivered fourth-quarter 2019 adjusted EPS of $2.49, outpacing the Zacks Consensus Estimate by 1.2%. Its fourth-quarter revenues of $4.13 billion surpassed the consensus estimate by 0.7%. The company currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Accuray reported second-quarter fiscal 2020 adjusted EPS of a penny, whereas the Zacks Consensus Estimate was pegged at a loss of 7 cents. Net revenues of $98.8 million outpaced the consensus estimate by 0.3%. The company sports a Zacks Rank #1 at present.

ResMed, currently with a Zacks Rank #1, reported second-quarter fiscal 2020 adjusted EPS of $1.21, surpassing the Zacks Consensus Estimate by 19.8%. Its revenues of $736.2 million outpaced the consensus mark by 1.5%.

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