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Bio-Rad Laboratories (BIO - Snapshot Report), a worldwide provider of life science research and clinical diagnostic products, reported second quarter 2013 earnings of $1.20 per share, down 28.9% year over year. However, the reported earnings were 7.1% ahead of the Zacks Consensus Estimate of $1.12 per share.

Revenues were $525.3 million in the reported quarter, an improvement of 2.9% on a year-over-year basis (up 4.0% at Constant Exchange Rate or CER). However, it missed the Zacks Consensus Estimate of $528 million. Revenues include $6.2 million of sales from the company's acquisition of AbD Serotec in Jan 2013.

During the quarter, Bio Rad had balanced growth across many of its key diagnostic and life science markets. Net revenue from the Life Science segment was $170.4 million, up 4.9% year over year (up 6.2% at CER) on the back of higher sales of antibodies and reagents resulting from the company's acquisition of AbD Serotec as well as sales of Bio-Rad's Droplet Digital PCR product line. Bio Rad introduced the S3cell sorter, an easy-to-use, automated and affordable benchtop cell sorter designed for both core facilities and individual research labs during the second quarter. 

In the Clinical Diagnostics segment, revenues increased 2.2% to $300.1 million. This growth was led by good performance across its product range, including diabetes monitoring and quality control products. Moreover, strong diagnostics sales in China and Asia-Pacific were partially offset by a decline in Europe.

Gross profit increased 4.2% year over year to $52.9 million, leading to a 72 basis points (bps) expansion in gross margin, which was pegged at 57.1% in the quarter. The upside reflects a favorable product mix and increased manufacturing efficiencies.

On the other hand, with a 15.8% rise in operating expenses to $248.5 million, the company experienced a 29.6% decline in operating profit to $51.5 million. This led to a huge 455 bps contraction in operating margin to 9.8%.

The rise in operating expenses was driven by higher research and development (up 1.7% to $53.2 million) and selling, general and administrative expenses (up 20.4% to $195.3 million).

Bio-Rad is currently focused on expansion in both Life Science and Clinical Diagnostics segments through acquisitions and asset purchases. The company’s major competitors in these two markets include Thermo Fisher Scientific (TMO - Analyst Report) and Roche (RHHBY - Analyst Report). The company currently operates and conducts business in many countries outside the U.S. As a result, it is exposed to movements in foreign currency exchange rates. Operating margin contraction, which leads to pressure on the bottom line, remains a matter of concern. Bio Rad carries a Zacks Rank #3 (Hold).

Other Stocks to Consider

Among other medical stocks, Alere (ALR - Snapshot Report) carrying a Zacks Rank #1 (Strong Buy) is worth considering.

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