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Bruker (BRKR) Up 7.7% Since Earnings Report: Can It Continue?

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It has been about a month since the last earnings report for Bruker Corporation (BRKR - Free Report) . Shares have added about 7.7% in that time frame, outperforming the market.

Will the recent positive trend continue leading up to the stock's next earnings release, or is it due for a pullback? 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 Q1 Earnings Meet, Revenues Beat Estimates

Bruker reported adjusted earnings per share (EPS) of $0.19 in the first quarter of 2017, lower than the year-ago figure by 9.5%. Adjusted EPS were in line with the Zacks Consensus Estimate.

Excluding one-time adjustments, Bruker reported net income of $21.6 million or $0.13 per share in the first quarter, reflecting an 8.5% or 7.1% decline, respectively, from the year-ago quarter.

Revenues in Detail

Bruker reported revenues of $384.9 million in the first quarter, up 2.5% year over year. The top line surpassed the Zacks Consensus Estimate of $372 million by a decent margin. Excluding a 5.3% positive effect from acquisitions and a 2.0% negative effect from changes in foreign currency rates, Bruker reported a year-over-year organic revenue decline of 0.8% in the first quarter of 2017.

Geographically and currency adjusted, within Bruker’s Scientific Instruments group, European revenues declined in the mid-single digits in the first quarter, reflecting soft order entry last year. North America revenues increased in the low-single digits. Asia Pacific was up double digits, including over 20% growth in China on impressive growth in both academic and industrial customer count. However, Japan was down in the low-single digits.

At constant currency, the BioSpin, B-NANO and BEST Groups saw growth, while CALID revenues declined.

The Bruker BioSpin Group reported low single-digit revenue growth, as solid NMR (Nuclear magnetic resonance) results more than offset PCI (Preclinical Imaging) revenue weakness.

The Bruker NANO reported high single-digit revenue growth, driven by Hysitron nanoindenting product's acquisition, strong growth in the semiconductor metrology tools, and enhanced results at the AXS business.  

The Bruker CALID Group reported a year-over-year revenue decline in the mid-to-high single digits in first-quarter 2017.
BEST revenues were substantially higher on a year-over-year basis, backed by the Bruker-OST acquisition in Nov 2016.

Margin Trend

Gross margin in the reported quarter expanded 140 basis points (bps) to 45.8%, while according to the company, the adjusted gross margin expanded 90 bps to 47.6%. Despite market-related volume declines, gross margin expanded on NMR price and efficiency gains along with the 2016 restructurings and factory consolidations within the Daltonics and AXS businesses of the company.

Selling, general & administrative expenses increased 5.8% to $98.1 million and research and development expenses rose 4.2% to $37.6 million from the year-ago period. The other charges declined 22.5% year over year to $3.1 million. Operating margin expanded 71 bps to 9.8%. According to the company, adjusted operating margin expanded 20 bps year over year to 12.8% due to additional expenses from the recent acquisitions of InVivo and Hysitron. Also, growth in NMR, favorable average selling prices and improved productivity contributed to the expansion in operating margin.

Financial Position

Bruker exited first-quarter 2017 with cash and cash equivalents and short-term investments of $464.5 million, down from $500.3 million at the end of 2016. The net cash provided by operating activities was $32.6 million, up from net cash used in operating activities of $14.0 million a year ago.

Adjusted free cash flow was $21.1 million in the reported quarter, compared with net cash used in operating activities of $22.0 million in the year ago quarter. A year-over-year increase in customer advances, requirement of less cash for working capital and the timing of incentive compensation payments contributed to positive free cash flow.

2017 Guidance

Bruker provided an update to its guidance for full-year 2017.

Total revenue growth rate expectation for the year has been raised to a new band of 2–3.5% from the earlier range of 1.5–2.5%. However, organic revenue growth guidance remains unchanged at 1–2% with acquisition growth is expected at 3.5–4% (unchanged).

Changes in foreign currency rates are expected to have an adverse impact on revenues of approximately 2.5%. The current Zacks Consensus Estimate for 2017 revenues is pegged at $1.65 billion.

The company also expects 2017 adjusted operating margin increase of approximately $0.40–$0.70 bps year over year, unchanged from the previous guidance. This includes an approximate 40-bps headwind in fiscal 2017 from recent strategic acquisitions.  

On the bottom-line front, Bruker continues to expect adjusted EPS in the band of $1.05–$1.09. The current Zacks Consensus Estimate for 2017 EPS is pegged at $1.08.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates moved upward during the past month. There have been three revisions higher for the current quarter compared to two lower.

Bruker Corporation Price and Consensus

 

Bruker Corporation Price and Consensus | Bruker Corporation Quote

VGM Scores

At this time, Bruker's stock has a subpar Growth Score of 'D', however its Momentum 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.

The company's stock is suitable solely for momentum based on our styles scores.

Outlook

While estimates have been trending upward for the stock the magnitude of these revisions has been net zero. The stock has a Zacks Rank #3 (Hold). We are looking for an inline return from the stock in the next few months.


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