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Bruker's (BRKR) Q3 Earnings & Revenues Surpass Estimates

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Bruker Corporation (BRKR - Free Report) delivered adjusted earnings per share (EPS) of 42 cents in the third quarter of 2020, down 2.3% year over year. However, the figure surpassed the Zacks Consensus Estimate by 27.3%.

The adjustments include expenses related to purchased intangible amortization and restructuring costs.

GAAP EPS for the quarter was 35 cents a share, marking a 10.3% decline from the year-earlier figure.

Revenues in Detail

Bruker registered revenues of $511.4 million in the third quarter, down 1.9% year over year. However, the figure surpassed the Zacks Consensus Estimate by 5.3%.

Excluding a positive impact of 0.3% from acquisitions and a 2.4% positive impact from changes in foreign currency rates, the company recorded organic revenue decline of 4.6%.

The fall in reported and organic revenues resulted from softer global instrumentation demand from the academic and industrial customers, along with lower demand for BEST superconductors during the pandemic and economic slowdown.

Geographically, the United States witnessed an 11.4% decline in revenues in the reported quarter. Also, the Other category’s revenues declined 21.5%. However, Europe revenues rose 8.2% year over year, with revenues in the Asia Pacific edging up 0.9%.

Segments in Details

Bruker reports results under three segments — BSI Life Science (comprising BioSpin and CALID), BSI Nano and BEST.

In the third quarter, BioSpin Group revenues improved 5.8% from the year-ago quarter to $152.1 million due to favorable customer response toward the Avance NEO 1.2 GHz Nuclear Magnetic Resonance (“NMR”) system, which was successfully installed at the Eidgenössische Technische Hochschule (ETH) in Zurich, Switzerland.

CALID revenues were up 8.3% year over year to $171.3 million, primarily resulting from continued growth in Daltonics microbiology and infectious disease diagnostics, and Life Science mass spectrometry businesses. CALID's microbiology and infectious disease consumables, which include the MALDI Biotyper Consumables and Bruker high molecular diagnostic consumables and timsTOF proteomics revenues, recorded significant growth year over year. Further, Bruker’s high-end diagnostics business gained from strength in Polymerase Chain Reaction (“PCR”) products, mainly in Europe.

Total BSI Life Science revenues were $323.4 million, up 7.1% year over year.

Revenues in the Nano group fell 13.4% to $147.1 million due to lower demand from academic, industrial and industrial research customers.

Organic revenues and revenues at constant exchange rate or CER of the BSI segment (including BSI Life Science and BSI Nano Segments) declined 3% and 0.3% year over year, respectively.

Bruker Corporation Price, Consensus and EPS Surprise

 

Bruker Corporation Price, Consensus and EPS Surprise

Bruker Corporation price-consensus-eps-surprise-chart | Bruker Corporation Quote

In the third quarter, the company’s BEST segment’s revenues were $43.8 million, indicating a fall of 16.6% year over year, resulting from lower demand for superconductors by MRI companies.

Organically, the BEST segment revenues declined 20.3% year over year, net of intercompany eliminations. At CER, the segment fell 17%.

Margin Trend

In the quarter under review, Bruker’s gross profit fell 2.2% to $248.3 million. Gross margin contracted 17 basis points (bps) to 48.6%.

Meanwhile, selling, general & administrative expenses fell 8.5% to $114.6 million. However, research and development expenses went up 4.8% year over year to $48.3 million. Adjusted operating expenses of $162.9 million declined 4.9% year over year.

Adjusted operating profit totaled $85.4 million, reflecting a 3.5% uptick from the prior-year quarter. Further, adjusted operating margin in the third quarter expanded 87 bps to 16.7%.

Financial Positions

Bruker exited the third quarter with cash and cash equivalents, and short-term investments of $617.1 million compared with $796.8 million at the end of the second quarter. Long-term debt (including current portion) at the end of the third quarter was $829.9 million compared with $1.02 billion at the end of the second quarter of 2020.

Cumulative net cash flow from operating activities at the end of the third quarter was $129.2 million compared with $77.2 million in the year-ago period.

The company incurred expenses of $18.5 million as payment of dividends to common stockholders and repurchased $55 million worth of stocks for the first nine months of 2020. As of Sep 30, Bruker had $102.7 million remaining under its share repurchase authorization.

2020 Guidance

Bruker’s 2020 financial guidance remains suspended due to challenging business conditions created by the pandemic. However, the company expects to witness a continued negative year-over-year impact of the pandemic on the fourth-quarter results.

Our Take

Bruker ended the third quarter with better-than-expected results. However, year-over-year decline in revenues across two of the reporting segments as well as geographies due to business disruptions is concerning. Contraction of gross margin is discouraging as well. The company’s inability to provide any financial guidance also raises apprehensions.

On a positive note, the customer acceptance of the Avance NEO 1.2 GHz NMR system at the ETH Zurich bodes well. Bruker’s acquisition of Canopy Biosciences, LLC (a renowned name in high multiplex biomarker imaging) and collaboration with Utrecht University to advance the study of the 3-D structures and interactions of proteins by mass spectrometry look encouraging.

Further, launch of Bruker’s NanoRacer high-speed atomic force microscopy system and FluoroType SARS-CoV-2 plus next-generation 6-plex PCR assay for the highly specific detection of the SARS-CoV-2 virus instill optimism in the stock. Strength in Bruker’s BSI Life Science along with robust performances in Europe and Asia Pacific buoy optimism. Expansion of the adjusted operating margin bodes well for the company.

Zacks Rank and Stocks to Consider

Bruker currently carries a Zacks Rank #4 (Sell).

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 Align Technology, Inc. (ALGN - Free Report) .

West Pharmaceutical reported third-quarter 2020 adjusted EPS of $1.15, beating the Zacks Consensus Estimate by 13.9%. Net revenues of $548 million outpaced the consensus estimate by 7.2%. It currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Thermo Fisher, a Zacks Rank #1 company, reported third-quarter 2020 adjusted EPS of $5.63, beating the Zacks Consensus Estimate by 28.8%. Revenues of $8.52 billion outpaced the consensus mark by 10%.

Align Technology reported third-quarter 2020 adjusted EPS of $2.25, surpassing the Zacks Consensus Estimate by a stupendous 281.4%. Net revenues of $734.1 million exceeded the Zacks Consensus Estimate by 38%. It currently carries a Zacks Rank #2.

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