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Bio-Rad (BIO) Q2 Earnings Beat Estimates, Gross Margin Rises

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Bio-Rad Laboratories, Inc. (BIO - Free Report) posted second-quarter 2020 adjusted earnings per share (EPS) of $1.61, which surpassed the Zacks Consensus Estimate by 23.8%. Moreover, the bottom line rose 8.1% from the prior-year quarter.

The quarter’s adjustments eliminate the impacts of certain non-recurring items like asset amortization costs, legal charges, restructuring costs and acquisition-related one-time benefits.

GAAP EPS of the company was $32.15 per share in the quarter, up 61.9% year over year.

Revenues in Detail

Bio-Rad’s revenues of $536.9 million in the quarter surpassed the Zacks Consensus Estimate by 1.9%. However, revenues declined 6.2% from the year-ago quarter (down 4.4% at constant exchange rate or CER).

BioRad Laboratories, Inc. Price, Consensus and EPS Surprise

 

BioRad Laboratories, Inc. Price, Consensus and EPS Surprise

BioRad Laboratories, Inc. price-consensus-eps-surprise-chart | BioRad Laboratories, Inc. Quote

Per the company, while boosting demand for some of its products, the pandemic adversely impacted some of its business operations during the second quarter of 2020.

Segmental Analysis

Sales at the Life Sciences segment in the second quarter totaled $252.1 million, up 18.7% year over year and 20% at CER. The reported growth was primarily driven by sales of Polymerase Chain Reaction (PCR), Droplet Digital PCR and Process Media products. Geographically, the company’s quarterly growth was led by Asia and Europe.

Net sales at the Clinical Diagnostics segment totaled $283.2 million, down 20.7% on a year-over-year basis and 18.7% at CER. The downside was seen across all regions and products.

Margins

In the quarter under review, Bio-Rad’s gross profit fell 4.8% to $292.9 million. However, gross margin expanded 82 basis points (bps) to 54.6%. Per the company, adjusted gross margin was 55.5%, expanding 110 bps.

Operating expenses were $241.2 million in the second quarter, down 4% year over year. Operating profit totaled $51.7 million, reflecting an 8.2% fall from the prior-year quarter. However, operating margin in the second quarter contracted 21 bps to 9.6%.

Company-adjusted operating margin was 11.8%, expanding 70 bps year over year.

Financial Update

Bio-Rad exited the second quarter with cash and cash equivalents (including short-term investments) of $1.037 billion compared with $1.042 billion at the end of the first quarter of 2020. Long-term debt (including current maturities) at the end of the second quarter was $438.7 million compared with $438.5 million.

Cumulative net cash flow from operating activities at the end of the quarter under review was $154.9 million compared with $198.3 million in the year-ago quarter.

Bio-Rad, on Nov 28, 2017, had announced management’s authorization of a new share repurchase program. This granted Bio-Rad the authority to repurchase, on a discretionary basis, up to $250 million of the outstanding shares of its common stock ("Share Repurchase Program"). Per this, $73.1 million remained under the Share Repurchase Program till Jun 30, 2020. On Jul 30, 2020 Bio-Rad announced management’s authorization to increase the Share Repurchase Program, allowing repurchase of up to an additional $200 million of stocks.

2020 Guidance

Given the economic impact of the coronavirus pandemic and uncertainties regarding the duration of the same, Bio-Rad has not provided its annual guidance for 2020.

However, the company expects third-quarter sales to be flat to up 5% at CER.

Our Take

Bio-Rad exited the second quarter of 2020 with better-than-expected results. The company witnessed solid bottom-line growth in the quarter. Despite the negative impact of the pandemic, its Life Sciences segment registered growth on robust sales of products associated with the pandemic, thus providing some counterbalance. Further, strength in many of its key product lines across major geographic regions buoys optimism.

The uptick in core PCR and Droplet Digital PCR product revenues resulted from robust demand due to COVID-19 testing and related research. Further, the FDA’s emergency use authorization for the Droplet Digital PCR COVID-19 test kit buoys optimism. Expansion of the company’s gross margin is encouraging as well.

However, decline in the company’s Clinical Diagnostics revenues is concerning. Operating margin contraction is discouraging as well. Bio-Rad’s inability to provide its full-year guidance is raising concerns too.

Zacks Rank and Stocks to Consider

Bio-Rad currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader medical space are West Pharmaceutical Services, Inc. (WST - Free Report) , Thermo Fisher Scientific Inc. (TMO - Free Report) and PerkinElmer, Inc. (PKI - Free Report) . All three stocks flaunt a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

West Pharmaceutical reported second-quarter 2020 adjusted EPS of $1.25, beating the Zacks Consensus Estimate by 37.4%. Net revenues of $527.2 million outpaced the consensus estimate by 6.9%.

Thermo Fisher reported second-quarter 2020 adjusted EPS of $3.89, beating the Zacks Consensus Estimate by 45.7%. Revenues of $6.92 billion outpaced the consensus mark by 0.1%.

PerkinElmer reported second-quarter 2020 adjusted EPS of $1.57, surpassing the Zacks Consensus Estimate by 68.8%. Revenues of $811.7 million outpaced the consensus mark by 1.3%.

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