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Here's Why You Should Add Bio-Rad (BIO) to Your Portfolio

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Bio-Rad Laboratories, Inc. (BIO - Free Report) has been gaining on robust growth in the Life Science segment and strong international performance. The company’s better-than-expected results in the fourth quarter of 2020 buoy optimism. However, downsides may result from a stiff competitive landscape and dull performance by the Clinical Diagnostics arm.

Over the past year, shares of this Zacks Rank #2 (Buy) company have outperformed the industry. The company has gained 66.9% compared with 48.7% growth of the industry 67.6% rise of the S&P 500.

The renowned manufacturer and global supplier of clinical diagnostics and life science research products has a market capitalization of $16.92 billion. The company projects 6.7% growth for the next year and expects to maintain strength in its Life Science business. The company surpassed estimates in all of the trailing four quarters, the average surprise being 37.95%.

Let’s delve deeper.

Impressive Q4 Results: We are upbeat about Bio-Rad’s fourth-quarter 2020 results. The company’s Life Science segment witnessed strong pandemic-induced sales. Further, strength in many of its key product lines across major geographies amid pandemic buoys optimism.  Uptick in testing products revenues as well as continued momentum in the Droplet Digital PCR (ddPCR) business instills investors’ confidence in the stock.

Strong International Performance: We are upbeat about Bio-Rad deriving more than 60% of its net sales globally. The company recorded year-over-year revenue growth of 73.9% at constant exchange rate (CER) across geographies during the fourth quarter driven by the Polymerase Chain Reaction (“PCR”) product lines along with robust performance by the biopharma segment. Further, the company registered overall top-line growth of 24.4% at CER across all regions during the reported quarter.

Robust Testing Portfolio: We are optimistic about Bio-Rad’s robust demand for PCR-based products related to COVID-19 testing and research, resulting in an uptick in core PCR, ddPCR and Process Media product revenues. The company launched two new PCR systems — the CFX Opus 96 and the CFX Opus 384 — in September 2020 to strengthen its global response and contribution toward combating the pandemic.

In February 2021, the company received the FDA’s EUA for a COVID-19, influenza A and influenza B RT-PCR syndromic multiplex test. Earlier in January 2021, Bio-Rad received the FDA’s EUA for its COVID RT-PCR assay kit.

However, downsides might result from Bio-Rad’s operation in a highly competitive industry, which includes large multinational corporations with significant resources as well as start-ups. Also, the competitive and regulatory conditions in the markets where Bio-Rad operates limit its ability to switch to strategies like price increases or those which might push up costs.

Bio-Rad’s Clinical Diagnostics segment continued its dismal performance in the fourth quarter as well. The segment was adversely impacted by lower demand resulting from the COVID-19 pandemic.

Estimate Trends

Bio-Rad has been witnessing a positive estimate revision trend for the current year. Over the past 90 days, the Zacks Consensus Estimate for its earnings has moved 10.3% north to $11.25.

The Zacks Consensus Estimate for its first-quarter 2021 revenues is pegged at $661 million, suggesting 15.6% growth from the year-ago reported number.

Other Key Picks

A few other top-ranked stocks from the broader medical space are Envista Holdings Corporation (NVST - Free Report) , Meridian Biosciences and Owens & Minor, Inc. (OMI - Free Report) , each sporting a Zacks Rank #1(Strong Buy). You can see the complete list of Zacks #1 Rank stocks here.

Envista has a projected long-term earnings growth rate of 24.4%.

Meridian Biosciences has a projected long-term earnings growth rate of 61.7%.

Owens & Minor has an estimated long-term earnings growth rate of 48.9%.

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