Bio-Rad Laboratories, Inc.
BIO
is well poised for growth in the coming quarters, backed by strength across key product lines. Robust performance across several geographies instills optimism. The company ended the first quarter of 2022 with better-than-expected results. A strong solvency position is an added upside. However, competitive pressure and foreign exchange woes do not bode well.
In the past year, shares of this Zacks Rank #2 (Buy) company have dropped 23.2% compared with a 33.5% fall of the
industry
it belongs to and a 12.8% decline of the S&P 500 composite.
The renowned manufacturer and global supplier of clinical diagnostics and life science research products has a market capitalization of $14.24 billion.
In the past five years, the company registered earnings growth of 31.2%, way ahead of the industry’s 8.8% rise and the S&P 500’s 13.4% increase. The company’s earnings have surpassed estimates in the trailing four quarters, the average surprise being 58.9%.
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Let’s delve deeper.
Key Drivers
Q1 Upsides:
Bio-Rad’s first-quarter earnings and revenues surpassed the Zacks Consensus Estimate. The company continued to experience recovery in most of its key global markets, with strong growth of Process Media and Droplet Digital PCR products. Further, strength in its key product lines across major geographic regions buoys optimism. Within the Diagnostics business, the company witnessed recovery in its Immunohematology business. Expansion of both margins is an added plus.
Focus on International Markets:
Bio-Rad has been deriving more than 60% of its net sales from international markets. Europe happens to be the largest international market for the company. On a geographic basis, the Diagnostics group’s currency-neutral year-over-year sales grew in the Americas and Europe. In the Life Science business, all regions witnessed growth compared with the year-ago quarter.
Segmental Growth:
We are encouraged by Bio-Rad’s robust segmental performance in the first quarter. Excluding COVID-related sales, the company’s underlying Life Science business’ year-over-year currency-neutral core revenue growth was 12.9% in the quarter under review. The year-over-year growth was driven by Droplet Digital PCR and the qPCR business, which is experiencing excellent uptake from Bio-Rad’s new-generation CFX Opus platform.
Core Clinical Diagnostics revenues, excluding COVID-related sales, inched up 1.7% year over year on a currency-neutral basis. The Diagnostics group’s currency-neutral year-over-year sales gain was driven by the blood-typing and clinical immunology businesses.
Strong Solvency and Balance Sheet:
Bio-Rad exited the first quarter of 2022 with cash and cash equivalents (including short-term investments) of $2.08 billion. Total debt (including current maturities) at the end of the first quarter of 2022 was $1.19 billion, much lower than the quarter-end cash and cash equivalent and investments level, indicating strong solvency. This is good news in terms of the solvency position of the company, at least during the economic downturn, implying that the company is holding sufficient cash for debt repayment.
Downsides
Tough Competitive Pressure:
Bio-Rad operates in a highly competitive environment dominated by firms varying from large multinational corporations with significant resources to start-ups. Also, the competitive and regulatory conditions in the markets where Bio-Rad operates limit its ability to switch to strategies like price increases and other drivers of cost increases.
Exposure to Foreign Currency:
Bio-Rad is susceptible to foreign currency headwinds. In the past several years, the company’s earnings were significantly affected by unfavorable foreign exchange movements.
Estimate Trends
The Zacks Consensus Estimate for Bio-Rad’s 2022 earnings is pegged at $14.20, suggesting a 9.3% fall from the year-ago reported number.
The Zacks Consensus Estimate for its 2022 revenues is pinned at $2.86 billion, indicating a 2.2% fall from the year-ago reported number.
Other Key Picks
A few better-ranked stocks in the broader medical space are
Alkermes plc
ALKS
,
AMN Healthcare Services, Inc.
AMN
and
Medpace Holdings, Inc.
MEDP
.
Alkermes has an estimated long-term growth rate of 25.1%. Alkermes’ earnings surpassed estimates in the trailing four quarters, the average surprise being 350.5%. It currently sports a Zacks Rank #1 (Strong Buy). You can see
the complete list of today’s Zacks #1 Rank stocks here.
Alkermes has outperformed the industry in the past year. ALKS has gained 14.4% against the industry’s 45.5% decline in the said period.
AMN Healthcare has a long-term earnings growth rate of 1.1%. The company surpassed earnings estimates in the trailing four quarters, delivering a surprise of 15.6%, on average. It currently flaunts a Zacks Rank #1.
AMN Healthcare has outperformed its industry in the past year. AMN has gained 3% against the industry’s 54.9% fall.
Medpace has a historical growth rate of 27.3%. Medpace’s earnings surpassed estimates in the trailing four quarters, the average surprise being 17.1%. It currently has a Zacks Rank #2.
Medpace has outperformed its industry in the past year. MEDP has declined 23.8% compared with the industry’s 54.9% fall.
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