A month has gone by since the last earnings report for Bruker (BRKR). Shares have lost about 4.5% 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 its most recent earnings report in order to get a better handle on the important catalysts.
Bruker’s Q2 Earnings Surpass Estimates, Margins Fall
Bruker delivered adjusted earnings per share of 21 cents in the second quarter of 2020, down 36.4% year over year. However, the figure surpassed the Zacks Consensus Estimate of 5 cents.
The adjustments include expenses related to purchased intangible amortization and restructuring costs.
GAAP earnings per share for the quarter was 16 cents a share, marking a 30.4% decline from the year-earlier figure.
Revenues in Detail
Bruker registered revenues of $424.6 million in the second quarter, down 13.4% year over year.
Excluding a positive impact of 0.4% from acquisitions and a 1.1% negative impact from changes in foreign currency rates, the company recorded organic revenue decline of 12.7% and a 14.5% drop at CER year over year.
The fall in reported and organic revenues resulted from business disruptions across the globe and softer global instrumentation demand arising from the pandemic.
Geographically, the United States witnessed an 18.7% decline in revenues in the reported quarter. Also, revenues in the Asia Pacific fell 11.5% and the Other category’s revenues declined 28.2%. Further, Europe revenues fell 7.2% year over year.
Segments in Details
Bruker reports results under three segments — BSI Life Science (comprising BioSpin and CALID), BSI NANO and BEST.
In the second quarter, BioSpin Group revenues fell 17.1% from the year-ago quarter to $125.1 million due to the pandemic-led customer loss and installation delays along with the temporary closure of one of BioSpin’s manufacturing sites.
CALID revenues were down 5.6% year over year to $132.7 million, primarily resulting from fall in molecular spectroscopy revenues. However, the decline was partially offset by continued growth in Daltonics Life Science mass spectrometry, microbiology and infectious disease diagnostics business. CALID’s microbiology and infectious disease consumables, which include the MALDI Biotyper Consumables and Bruker Hain nucleic acid extraction and COVID-19 Polymerase Chain Reaction assays, recorded significant growth year over year.
Total BSI Life Science revenues were $291.4 million, down 11.5% year over year.
Revenues in the Nano group fell 16.9% to $125.5 million due to global academic customer closures due to the pandemic, weaker industrial markets demand and temporary factory closures at some of Nano’s businesses.
Organic revenues and revenues at CER of the BSI segment (including BSI Life Science and BSI Nano Segments) declined 12.7% and 13.4% year over year, respectively.
In the second quarter, the company’s BEST segment’s revenues were $44.8 million, indicating a fall of 13.7% year over year resulting from lower demand for superconductor toward the quarter-end.
However, organically, the BEST segment revenues declined 12.5% year over year, net of intercompany eliminations. At CER, the segment fell 13.6%.
Margin Trend
In the quarter under review, Bruker’s gross profit fell 19.2% to $186.2 million. Gross margin contracted 315 basis points (bps) to 43.9%.
Meanwhile, selling, general & administrative expenses fell 17.8% to $102.4 million. Research and development expenses went down 9.1% year over year to $44.1 million. Adjusted operating expenses of $146.5 million declined 15.3% year over year.
Adjusted operating profit totaled $39.7 million, reflecting a 30.8% decline from the prior-year quarter. Further, adjusted operating margin in the second quarter contracted 236 bps to 9.3%.
Financial Position
Bruker exited the second quarter with cash and cash equivalents, and short-term investments of $796.8 million compared with $851.7 million at the end of the first quarter. Long-term debt at the end of the second quarter was $924.2 million compared with $914.8 million at the end of the first quarter of 2020.
Cumulative net cash flow from operating activities at the end of the second quarter was $46.8 million compared with $24.8 million in the year-ago period.
The company incurred expenses of $12.3 million as payment of dividends to common stockholders and repurchased $50 million worth of stocks for the first six months of 2020. As of Jun 30, Bruker had $107.7 million remaining under its share repurchase authorization.
2020 Guidance
Bruker’s 2020 financial guidance remains suspended due to challenging business conditions created by the pandemic. However, the company expects to witness a sequential improvement in financial results in the third quarter of 2020 despite the expectation of a continued negative year-over-year impact of the pandemic on the third quarter results.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended downward during the past month.
VGM Scores
Currently, Bruker has a subpar Growth Score of D, however its Momentum Score is doing a lot better with a B. However, 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.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions has been net zero. Notably, Bruker has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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