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Here's Why You Should Retain Bio-Rad (BIO) Stock for Now

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Bio-Rad Laboratories, Inc. (BIO - Free Report) has been gaining from robust performance across international markets. The company’s wide range of offerings in the blood typing market appears promising. The raised revenue guidance for 2021 raises investor confidence. However, tough competition and foreign exchange headwinds do not bode well for the company.

Over the past year, shares of this Zacks Rank #3 (Hold) company have declined 0.6% against the 18% fall of the industry it belongs to and 15.2% surge of the S&P 500 composite.

The renowned manufacturer and global supplier of clinical diagnostics and life science research products has a market capitalization of $18.75 billion.

Over the past five years, the company registered earnings growth of 23.6%, way ahead of the industry’s 7.0% rise and the S&P 500’s 2.8% increase. The company’s earnings have surpassed estimates in the trailing four quarters, the average surprise being 71.3%.

Zacks Investment ResearchImage Source: Zacks Investment Research

Let’s delve deeper.

Key Drivers

Focus on International Markets:  Bio-Rad has been deriving more than 60% of its net sales from international markets in recent times, with Europe being the largest international market for the company. Geographically, the company registered quarterly growth at CER across the Americas and Asia during the third quarter. 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 both academic and diagnostic labs.

Solid Prospects in Blood Typing Market: Bio-Rad offers a broad range of platforms, reagents, data management and connectivity solutions to cater to various blood typing demands. The company offers 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. We are encouraged by Bio-Rad’s offerings in this niche market, including products like the IH-500 and IH-1000.

Upbeat Guidance: Bio-Rad has updated its guidance for full-year 2021. The company anticipates revenue growth of 12-13% for full-year 2021 compared with the previous guidance of 10-10.5%. The Zacks Consensus Estimate for the same is pegged at $2.90 billion, suggesting 13.7% growth from the 2020 reported figure.

Downsides

Exposure to Foreign Currency: Bio-Rad is exposed 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 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 an increased pricing burden.

Tough Competition: Bio-Rad operates in a highly competitive environment dominated by firms varying from large multinational corporations with significant resources to start-ups. The company faces significant pricing pressure as a result of stiff competition, which makes it difficult for the company to manage its operational, financial and business conditions efficiently.

Estimate Trends

The Zacks Consensus Estimate for Bio-Rad’s 2021 earnings is pegged at $15.33, suggesting 45.7% growth from the year-ago reported number.

The Zacks Consensus Estimate for its fourth-quarter 2021 revenues is pinned at $2.90 billion, suggesting 13.7% growth from the year-ago reported number.

Other Key Picks

A few better-ranked stocks in the broader medical space are Owens & Minor, Inc. (OMI - Free Report) , Charles River Laboratories International, Inc. (CRL - Free Report) and Cerner Corporation , each currently carrying a Zacks Rank #2 (Buy).You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Owens & Minor has a long-term earnings growth rate of 23.6%. Owens & Minor’s earnings surpassed estimates in the trailing four quarters, delivering a surprise of 32.4%, on average.

Owens & Minor has outperformed the industry over the past year. OMI has gained 34.6% against an 18.4% industry decline in the said period.

Charles River has a long-term earnings growth rate of 14%. Charles River surpassed earnings estimates in the trailing four quarters, delivering a surprise of 10.6%, on average.

Charles River has gained 20.5% against the industry’s 61.2% drop over the past year.

Cerner has a long-term earnings growth rate of 12.8%. CERN’s earnings surpassed estimates in three of the trailing four quarters and met estimates on another occasion, delivering an average surprise of 3.2%.

Cerner has gained 16.2% against the industry’s 56.4% slump over the past year.

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