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Bio-Rad (BIO) Suffers due to BioPharma Softness, Stiff Competition
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Bio-Rad (BIO - Free Report) suffers due to funding issue within BioPharma, macroeconomic headwinds and competitive pressures. The stock carries a Zacks Rank #4 (Sell) at present.
Since the beginning of 2023, Bio-Rad has been witnessing softness in smaller BioPharma companies, wherein the demand for life science products has been strong historically. This directly correlates with the funding constraints that the broader pharmaceutical industry has started to experience. Management puts forth that BioPharma’s softness has resulted in sluggish growth of the Life Science segment. Going by our model, we expect Bio-Rad's Life Science arm to register a decline of 1% in 2024.
In the fourth quarter of 2023, negative BioPharma macro trends persisted. Bio-Rad experienced reduced demand from biopharma customers for its process chromatography resins and from both biopharma and smaller biotech customers for the Life Science research projects – products. Bio-Rad experienced weaker demand in China due to softening macroeconomic conditions.
In recent times, Bio-Rad’s margin performance has been affected by the inflationary trend of elevated raw material costs, increased logistic costs and higher employee-related expenses. In the third quarter, the company’s gross margin was adversely impacted by an unfavorable product mix, with a higher-than-anticipated percentage of instrument sales versus reagents, as well as lower-than-projected revenues in the Life Science Group.
These macroeconomic factors, particularly the ongoing labor unrest, rising wages and raw material costs, along with ongoing geopolitical unrest, are leading to a significant escalation in BIO’s operating expenses. The company posted a 19.7% year-over-year decline in its operating profit in the fourth quarter.
Added to this, Bio-Rad operates in a highly competitive environment, dominated by firms ranging from large multinational corporations with significant resources to 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 hikes and other drivers of cost increases. Further, the extension of the public tender commitments to multiple years by the government, resulting in a reduced number of annual tenders, has led to aggressive tender pricing by Bio-Rad’s competitors. Thus, BIO faces pricing pressure due to increased competition, which makes it difficult for the company to manage its operational, financial and business conditions efficiently.
In the Life Science segment, Bio-Rad primarily competes with Becton Dickinson, GE Biosciences, Merck Millipore and Thermo Fisher Scientific. Again, some prominent competitors in the Clinical Diagnostics segment are Roche, Abbott Laboratories, Siemens, Danaher, Thermo Fisher, Becton Dickinson and DiaSorin.
On a positive note, within the Clinical Diagnostics business, the company’s diabetes franchise is seeing elevated growth and a substantial improvement in the immunohematology and quality control businesses. Bio-Rad recently launched the IH-500 next instrument, designed to enhance the functionality of the system, along with increased security from potential cyberattacks. The platform update, which includes updated software, increases the competitiveness of the company’s transfusion medicine portfolio. With production ramping up in Singapore following the manufacturing transition, management has better visibility on future Diagnostics output and, therefore, backlog reduction.
In the fourth quarter of 2023, despite a decline in infectious disease products, the Clinical Diagnostics year-over-year currency-neutral core revenue growth was 3.4%, driven by diabetes, quality control and blood typing products. During the quarter, the Clinical Diagnostics business registered strong performance, especially in Asia-Pacific, where the company prioritized placements to capture some strong growth trends, particularly in the diabetes testing franchise.
Key Picks
Some better-ranked stocks from the broader medical space are Cardinal Health (CAH - Free Report) , Stryker Corporation (SYK - Free Report) and Cencora, Inc. (COR - Free Report) .
Cardinal Health, carrying a Zacks Rank #1 (Strong Buy) at present, reported second-quarter fiscal 2024 adjusted earnings of $1.82 per share, which beat the Zacks Consensus Estimate by 16.7%. Revenues of $57.45 billion improved 11.6% on a year-over-year basis and also topped the Zacks Consensus Estimate by 1.1%. You can see the complete list of today’s Zacks #1 Rank stocks here.
CAH has a long-term estimated earnings growth rate of 15.3% compared with the industry’s 11.8% growth. The company’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 15.6%.
Stryker, carrying a Zacks Rank #2 (Buy) at present, reported a fourth-quarter 2023 adjusted EPS of $3.46, which beat the Zacks Consensus Estimate by 5.8%. Revenues of $5.8 billion outpaced the consensus estimate by 3.8%.
Stryker has an estimated earnings growth rate of 11.5% for 2025 compared with the S&P 500’s 9.9% increase. The company’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 5.1%.
Cencora, carrying a Zacks Rank #2 at present, reported a first-quarter fiscal 2024 adjusted EPS of $3.28, which beat the Zacks Consensus Estimate by 14.7%. Revenues of $72.3 billion outpaced the Zacks Consensus Estimate by 5.1%.
COR has an earnings yield of 5.75% compared with the industry’s 1.85%. The company’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 6.7%.
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Bio-Rad (BIO) Suffers due to BioPharma Softness, Stiff Competition
Bio-Rad (BIO - Free Report) suffers due to funding issue within BioPharma, macroeconomic headwinds and competitive pressures. The stock carries a Zacks Rank #4 (Sell) at present.
Since the beginning of 2023, Bio-Rad has been witnessing softness in smaller BioPharma companies, wherein the demand for life science products has been strong historically. This directly correlates with the funding constraints that the broader pharmaceutical industry has started to experience. Management puts forth that BioPharma’s softness has resulted in sluggish growth of the Life Science segment. Going by our model, we expect Bio-Rad's Life Science arm to register a decline of 1% in 2024.
In the fourth quarter of 2023, negative BioPharma macro trends persisted. Bio-Rad experienced reduced demand from biopharma customers for its process chromatography resins and from both biopharma and smaller biotech customers for the Life Science research projects – products. Bio-Rad experienced weaker demand in China due to softening macroeconomic conditions.
Bio-Rad Laboratories, Inc. Price
Bio-Rad Laboratories, Inc. price | Bio-Rad Laboratories, Inc. Quote
In recent times, Bio-Rad’s margin performance has been affected by the inflationary trend of elevated raw material costs, increased logistic costs and higher employee-related expenses. In the third quarter, the company’s gross margin was adversely impacted by an unfavorable product mix, with a higher-than-anticipated percentage of instrument sales versus reagents, as well as lower-than-projected revenues in the Life Science Group.
These macroeconomic factors, particularly the ongoing labor unrest, rising wages and raw material costs, along with ongoing geopolitical unrest, are leading to a significant escalation in BIO’s operating expenses. The company posted a 19.7% year-over-year decline in its operating profit in the fourth quarter.
Added to this, Bio-Rad operates in a highly competitive environment, dominated by firms ranging from large multinational corporations with significant resources to 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 hikes and other drivers of cost increases. Further, the extension of the public tender commitments to multiple years by the government, resulting in a reduced number of annual tenders, has led to aggressive tender pricing by Bio-Rad’s competitors. Thus, BIO faces pricing pressure due to increased competition, which makes it difficult for the company to manage its operational, financial and business conditions efficiently.
In the Life Science segment, Bio-Rad primarily competes with Becton Dickinson, GE Biosciences, Merck Millipore and Thermo Fisher Scientific. Again, some prominent competitors in the Clinical Diagnostics segment are Roche, Abbott Laboratories, Siemens, Danaher, Thermo Fisher, Becton Dickinson and DiaSorin.
On a positive note, within the Clinical Diagnostics business, the company’s diabetes franchise is seeing elevated growth and a substantial improvement in the immunohematology and quality control businesses. Bio-Rad recently launched the IH-500 next instrument, designed to enhance the functionality of the system, along with increased security from potential cyberattacks. The platform update, which includes updated software, increases the competitiveness of the company’s transfusion medicine portfolio. With production ramping up in Singapore following the manufacturing transition, management has better visibility on future Diagnostics output and, therefore, backlog reduction.
In the fourth quarter of 2023, despite a decline in infectious disease products, the Clinical Diagnostics year-over-year currency-neutral core revenue growth was 3.4%, driven by diabetes, quality control and blood typing products. During the quarter, the Clinical Diagnostics business registered strong performance, especially in Asia-Pacific, where the company prioritized placements to capture some strong growth trends, particularly in the diabetes testing franchise.
Key Picks
Some better-ranked stocks from the broader medical space are Cardinal Health (CAH - Free Report) , Stryker Corporation (SYK - Free Report) and Cencora, Inc. (COR - Free Report) .
Cardinal Health, carrying a Zacks Rank #1 (Strong Buy) at present, reported second-quarter fiscal 2024 adjusted earnings of $1.82 per share, which beat the Zacks Consensus Estimate by 16.7%. Revenues of $57.45 billion improved 11.6% on a year-over-year basis and also topped the Zacks Consensus Estimate by 1.1%. You can see the complete list of today’s Zacks #1 Rank stocks here.
CAH has a long-term estimated earnings growth rate of 15.3% compared with the industry’s 11.8% growth. The company’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 15.6%.
Stryker, carrying a Zacks Rank #2 (Buy) at present, reported a fourth-quarter 2023 adjusted EPS of $3.46, which beat the Zacks Consensus Estimate by 5.8%. Revenues of $5.8 billion outpaced the consensus estimate by 3.8%.
Stryker has an estimated earnings growth rate of 11.5% for 2025 compared with the S&P 500’s 9.9% increase. The company’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 5.1%.
Cencora, carrying a Zacks Rank #2 at present, reported a first-quarter fiscal 2024 adjusted EPS of $3.28, which beat the Zacks Consensus Estimate by 14.7%. Revenues of $72.3 billion outpaced the Zacks Consensus Estimate by 5.1%.
COR has an earnings yield of 5.75% compared with the industry’s 1.85%. The company’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 6.7%.