It has been about a month since the last earnings report for Qiagen (QGEN - Free Report) . Shares have added about 7.5% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Qiagen 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 drivers.
QIAGEN Q2 Sales Top Estimates on Growing COVID-19 Testing Demand
QIAGEN’s second-quarter 2020 adjusted earnings per share (EPS) were 55 cents, up 66.7% year over year (up 69.7% at constant exchange rate or CER). The figure was in line with the Zacks Consensus Estimate.
Notably, the bottom line matched the low end of the company’s preliminary earnings projection of 55-56 cents at CER, announced on Jul 9, 2020.
The adjustment excludes the impact of certain non-recurring items like business integration, acquisition and restructuring related expenses, and purchased intangibles amortization expenses, among others.
GAAP EPS for the quarter was 38 cents per share, up 100% year over year.
Revenues in Detail
Net sales at actual rates in the second quarter rose 16.2% on a year-over-year basis to $443.3 million (up 19% at CER). Also, the top line exceeded the Zacks Consensus Estimate by a marginal 0.1%.
Notably, the top line was in line with the company’s preliminary results.
Robust sales were recorded on significant demand for testing solutions used in the COVID-19 pandemic. However, there were weaker customer demand trends in other business arms of the company.
Geographical Revenue Update
In the quarter under review, sales from the Americas (40% of revenues) totaled $177 million, down 2% on a reported basis (down 1% at CER).
Revenues from Europe-Middle East-Africa (37% of revenues) rose 40% reportedly (up 44% at CER) to $164 million.
Further, revenues from Asia-Pacific/Japan (23% of revenues) rose 20% year over year on a reported basis (up 23% at CER) to $99 million.
As of the second quarter of 2020, QIAGEN has two major customer classes which are Molecular Diagnostics (that includes human healthcare including Precision Medicine and companion diagnostics) and Life Sciences (that includes Pharma and Academia/Applied Testing).
Molecular Diagnostics (representing 46% of net sales) revenues were up 9% on a reported basis (up 12% at CER) to $204 million.
Life Sciences (54% of total revenues) reported revenues of $239 million, up 23% on a reported basis (up 25% at CER).
Sales derived from Applied Testing/Academia rose 39% on a reported basis (up 42% at CER) to $164 million. Pharma sales, however, dropped 1% on a reported basis (unchanged at CER) in the second quarter to $75 million.
Adjusted gross profit in the quarter under review rose 16.7% to $309.9 million. Adjusted gross margin expanded 31 basis points (bps) to 69.9% despite a 14.9% rise in adjusted cost of revenues (adjusting for acquisition-related intangible amortization) to $133.3 million.
Adjusted operating income (excluding items like acquisition-related intangible amortization, restructuring and integration, asset impairment) rose 69.1% year over year to $159.9 million in the second quarter. Adjusted operating margin expanded a huge 1129 bps to 36.1%.
QIAGEN exited the second quarter of 2020 with cash and cash equivalents, and short-term investments of $744.2 million, up from $744.7 million at the end of the first quarter. Long-term debt (including current portion) was $ 1.705 billion at the second quarter of 2020, compared with $1.712 billion in the preceding quarter.
Cumulative net cash flow from operating activities at the end of the second quarter of 2020 was $150.6 million compared with $127.2 million a year ago.
Capital expenditure in the reported quarter was $50.2 million, down from the year-ago $54.4 million. The company reported free cash outflow of $100.4 million at the end of the second quarter compared with $72.9 million a year ago.
The company spent $74.4 million on its share repurchase program and $430 million for redemption of the 2019 convertible notes over the first six months of 2020.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended upward during the past month.
Currently, Qiagen has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. Charting a somewhat similar path, 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.
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Qiagen has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.