Bio-Rad Laboratories, Inc. ( BIO Quick Quote BIO - Free Report) is well poised for growth in the coming months, backed by strength in international markets. Further, growth in the clinical diagnostics arm buoys optimism. However, downsides may result from foreign exchange fluctuations and a difficult pricing scenario.
Over the past year, shares of this Zacks Rank #3 (Hold) company have outperformed the
industry. The company has gained 30.9% compared with 1.9% growth of the industry and 32.3% 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 $21.83 billion. The company projects 34.9% growth for the current year. The company surpassed estimates in the trailing four quarters, the average surprise being 71.56%.
Riding on current business growth and bullish near-term prospects, the company is worth holding on to for now.
Key Drivers Focus on International Markets: In recent times, Bio-Rad has been deriving more than 60% of its net sales from international markets. Europe happens to be the largest international market for the company. Geographically, Bio-Rad experienced currency-neutral growth across all three regions. The company continued to see strong demand for products associated with COVID-19 testing and related research. In the Life Science business, all regions witnessed growth compared to the year-ago quarter. Further, the company’s Clinical Diagnostics segment registered double-digit growth across all its product lines, driven by a recovery in routine testing. The company also noted the continued gradual capacity improvement at academic and diagnostic labs, returning to 90% and 95% of pre-COVID levels. Clinical Diagnostics Continues to Gain Momentum: Bio-Rad’s second-quarter 2021 clinical diagnostics sales were primarily driven by a recovery of routine testing. During the second quarter, the diagnostics group posted double-digit growth across all product lines. In a geographic basis, the diagnostics group currency-neutral year-over-year sales grew across all regions. Image Source: Zacks Investment Research
Bio-Rad recently teamed up with Seegene -- a global provider of multiplex molecular diagnostics. Seegene's diagnostic products have high sensitivity and specificity and are optimized to work with Bio-Rad's CFX Real-Time PCR Systems. The partnership with Seegene is intended to provide required diagnostic testing products to the U.S. markets.
Raised Guidance: We are optimistic about Bio-Rad’s raised 2021 guidance. The company now anticipates revenue growth of 10-10.5% for full-year 2021 compared with the previous guidance of 5.5-6%. Downsides
On the flip side, some factors have been deterring the stock’s rally of late.
Exposure to Foreign Currency: Bio-Rad derives more than 50% of its revenues from international markets, which exposes it to the effects of fluctuations in foreign currency. In the past several years, the company’s earnings were significantly affected by foreign exchange. Difficult Pricing Scenario: Bio-Rad is exposed to the effects of changes in the healthcare industry of 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, and increasing consolidations among healthcare providers have resulted in an increased pricing burden. 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 17.6% north to $14.20.
The Zacks Consensus Estimate for its third-quarter 2021 revenues is pegged at $671 million, suggesting 3.7% growth from the year-ago reported number.
A few better-ranked stocks from the broader medical space are
Alcon Inc ( ALC Quick Quote ALC - Free Report) , West Pharmaceutical Services, Inc. ( WST Quick Quote WST - Free Report) and Henry Schein, Inc. ( HSIC Quick Quote HSIC - Free Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of Zacks #1 Rank (Strong Buy) stocks here.
Alcon has an estimated long-term earnings growth rate of 18%.
West Pharmaceutical Services has an estimated long-term earnings growth rate of 27%.
Henry Schein has a projected long-term earnings growth rate of 14%.