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Here's Why You Should Retain Bruker (BRKR) Stock for Now

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Bruker Corporation (BRKR - Free Report) is well-poised for growth in the coming quarters, backed by the strength of its BioSpin Group and CALID businesses. The company’s recently released 2023 first-quarter results along with raised guidance for the full year, are also encouraging. However, Bruker is not well capitalized in terms of solvency, which is concerning.

In the past year, this Zacks Rank #3 (Hold) stock has risen 21.2% compared with 4.9% upside of the industry and a 3.3% rise of the S&P 500 composite.

The renowned medical device company has a market capitalization of $10.73 billion. Bruker projects a long-term estimated earnings growth rate of 18.2% compared with 13% of the industry. BRKR’s earnings surpassed estimates in all  the trailing four quarters and missed the same in one, delivering an average surprise of 10.9%.

Let’s delve deeper.

Upsides

Impressive Q1 Results: Bruker ended the first quarter of 2023 with better-than-expected earnings and revenues. The top line reflects a robust performance across all its operating segments and geographies, backed by continued demand for the company’s differentiated scientific instruments and life-science solutions. The expansion of the gross margin is an upside. The company’s adjusted operating margin benefited from Project Accelerate 2.0’s high-growth and high-margin initiatives, particularly in proteomics and spatial biology.

Meanwhile, the company raised its outlook for 2023 revenues and adjusted EPS. This factors into the quarter’s performance and strength in bookings and backlog, generating investors’ optimism.

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Strong Prospects for BioSpin: It is encouraging to see robust growth in revenues across Bruker’s BioSpin Group portfolio in the first quarter, including NMR and MRI preclinical imaging. Notably, the company received two orders from the United Kingdom for 1.2 gigahertz NMRs. Both will be used for structural and functional biology and life-science research and GreenTech and materials research as well.

CALID Group Holds Potential: Bruker’s CALID Group revenues increased 16.5% year over year in the first quarter. Organic revenues were supported by strong life science mass spectrometry and vibrational spectroscopy businesses.

The timsTOF platform continued its adoption in 4D proteomics, epiproteomics and multiomics. The company had excellent year-over-year growth in bookings and announced further key enhancements to advance capabilities.

Downsides

Weak Solvency: Bruker exited the first quarter of 2023 with cash and cash equivalents and short-term investments of $598 million compared with $646 million at the end of 2022.  However, the reported quarter’s total debt of $1.23 billion was much higher than the corresponding cash and cash equivalents level. This indicates a tough solvency position.

Exposure to Currency Movements: Bruker conducts 80% of its business in international markets. As a result, currency fluctuations continue to result in foreign currency transaction losses at the company. In addition, currency fluctuations could cause the price of Bruker’s products to be less competitive than its principal competitors' offerings.

Estimate Trend

Bruker has been witnessing a positive estimate revision trend for 2023. The Zacks Consensus Estimate for 2023 earnings per share (EPS) has moved up from $2.55 to $2.58 in the past 30 days.

The Zacks Consensus Estimate for the company’s 2023 revenues is pegged at $2.86 billion. This suggests a 12.8% rise from the year-ago reported number.

Key Picks

Some top-ranked stocks in the broader medical space are Zimmer Biomet (ZBH - Free Report) , Penumbra (PEN - Free Report) and Hologic, Inc. (HOLX - Free Report) .

Zimmer Biomet has an earnings yield of 5.72% compared with the industry’s -2.31%. Zimmer Biomet’s earnings surpassed the Zacks Consensus Estimate in all the trailing four quarters, the average surprise being 7.38%. Its shares have increased 8% against the industry’s 31.3% decline in the past year.

ZBH sports a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Penumbra, sporting a Zacks Rank #1 at present, has an estimated growth rate of 64.1% for 2024. Penumbra shares have risen 114.8% compared with the industry’s 2.4% increase over the past year.

PEN’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 109.4%.

Hologic, carrying a Zacks Rank #2 (Buy) at present, has an earnings yield of 4.84% compared with the industry’s -7.06%. Shares of HOLX have risen 4.7% compared with the industry’s 2.4% growth over the past year.

Hologic’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 27.3%.

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