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Bio-Rad (BIO) Hits a New 52-Week High: What's Driving It?

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Shares of Bio-Rad Laboratories, Inc. (BIO - Free Report) reached a new 52-week high of $567.33 on Oct 9, before closing the session marginally lower at $566.14. The stock has rallied 5.7% since its second-quarter 2020 earnings announcement on Jul 30.

The company is witnessing an upward trend in its stock price, prompted by robust demand in testing. Solid prospects in the blood typing market also bode well. Further, its solid performance in the second quarter despite the pandemic-led business disruptions boosted market sentiments. However, a stiff competitive landscape and difficult pricing scenario are concerning for the company.

Let's delve deeper.

Rise in Testing Demand

Bio-Rad recorded robust demand for polymerase chain reaction (PCR)-based products related to COVID-19 testing and research, resulting in an uptick in core PCR and ddPCR product revenues in the second quarter. The company has tied up with testing labs across the globe to meet the rising testing requirements for coronavirus.

In May, Bio-Rad received the FDA’s Emergency Use Authorization (EUA) for its SARS-CoV-2 ddPCR test kit, which runs on its QX200 and QXDx ddPCR systems. Further, Bio-Rad received another EUA for its SARS-CoV-2 Total Ab test, which the company has already commercially launched. Bio-Rad also launched a blood-based immunoassay kit to identify antibodies to the SARS-CoV-2, the virus causing coronavirus, in April.

Other Growth Drivers

Solid Blood Typing Market Prospects: Bio-Rad offers a broad range of platforms, reagents, data management and connectivity solutions to cater to various blood typing demands, offering efficient and reliable results for blood grouping, phenotyping, crossmatching, antibody screening and identification, direct antiglobulin tests, and single antigen typing. The company has also been actively expanding its portfolio for the blood typing market. The company currently offers products like IH-500 and IH-1000.

Encouraging Q2 Performance: Bio-Rad’s impressive performance in the second quarter buoys optimism. 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.

Geographically, the company’s quarterly growth was led by Asia and Europe. Per the company, despite affecting some of its business operations, the pandemic boosted demand for a few of its products in the reported quarter.

Downsides

Competitive Landscape: Bio-Rad competes against several large companies that have significant resources as well as start-ups. Also, the competitive and regulatory conditions in the markets where the company operates limit Bio-Rad’s ability to switch to strategies like price increases or those which might push up costs. Further, the extension of the public tender commitments to multiple years by the government, resulting in reduced number of annual tenders, have led to aggressive tender pricing by Bio-Rad’s competitors.

Difficult Pricing Scenario: Bio-Rad is exposed to the effects of changes in the healthcare industry in the United States and Europe. The changing trend toward managed care, healthcare reform of the delivery system in the United States, efforts to reform in Europe, along with increasing consolidations among healthcare providers have resulted in increased pricing burden.

Zacks Rank & Key Picks

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

Some better-ranked stocks from the broader medical space are QIAGEN N.V. (QGEN - Free Report) , Thermo Fisher Scientific Inc. (TMO - Free Report) and Boston Scientific Corporation (BSX - Free Report) .

QIAGEN’s long-term earnings-growth rate is estimated at 17.2%. It currently flaunts a Zacks Rank #1. (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Thermo Fisher’s long-term earnings-growth rate is estimated at 15.5%. It currently carries a Zacks Rank #2 (Buy).

Boston Scientific’s long-term earnings growth rate is estimated at 10%. The company presently carries a Zacks Rank #2.

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