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Bio-Rad (BIO) Earnings Miss Estimates in Q3, Revenues Beat

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Bio-Rad Laboratories, Inc. (BIO - Free Report) posted third-quarter 2018 adjusted earnings per share (EPS) of 91 cents, which missed the Zacks Consensus Estimate of $1.16 by 21.6%. Earnings declined 10.8% from the prior-year quarter.

Revenues in Detail

Revenues in the quarter totaled $545.1 million, beating the Zacks Consensus Estimate by 1.1%. Revenues improved 2.1% from the year-ago quarter and rose 3.4% at constant currency (cc).

Per management, solid demand across many of its key product lines led to growth across most geographical regions.

Segmental Analysis

Sales at the Life Sciences segment totaled $206.6 million, up 7.1% year over year and 8% at cc. Per management, the upside reflects higher sales in the cell biology, droplet Digital PCR and food safety product lines. Further, the company continues to see increased demand for its process media product lines.

On a geographic basis, sales at cc were particularly strong in the United States, China and India.

Bio-Rad Laboratories, Inc. Price, Consensus and EPS Surprise

 

Net sales at Clinical Diagnostics in the third quarter totaled $334 million, down 1.2% on a year-over-year basis. However, sales were up 0.5% at cc. The upside in the currency neutral sales indicates growth in immunology, diabetes monitoring, blood typing and quality-control product lines.

Geographically, sales rose in the Americas and Asia, partially offset by a decline in Europe.

Margins

Gross profit in the reported quarter totaled $286.7 million, down 4.1% from the prior-year quarter. Gross margin came in at 52.6%, down 340 basis points (bps). Per the company, changes in product mix, high service, warranty and reagent rental costs, along with extra inventory related expenses led to the decline in gross margin.

Adjusted gross margin came in at 53.5%, down 340 bps year over year.

Operating income grossed $36.3, down 6.4% from the year-ago quarter.

Guidance Updated

For 2018, the company reiterated revenue growth guidance at 4-4.5% (cc). The Zacks Consensus Estimate for the same is pegged at $2.72 billion.

Full-year operating margin is now projected in the 8-9% range from 10% stated earlier.

Our Take

Bio-Rad exited third-quarter 2018 on mixed note. We are however encouraged with the year-over-year rise in earnings and revenues. Sales growth at the Clinical Diagnostics segment was impressive as well. The company also saw strong growth in the Life Science segment and cell biology, Digital PCR and food safety product lines. Further, solid revenue growth in geographies like North America, China and Asia Pacific buoys optimism.

We are also upbeat about the company’s recent 510(k) clearance from the FDA for the IH-Reader 24, a semi-automated blood typing instrument designed for medium- to small-volume laboratories.

However, challenges associated with the implementation of the global ERP system raise concerns.

Zacks Rank & Key Picks

Bio-Rad has a Zacks Rank #3 (Hold).

A few better-ranked stocks in the broader medical space, which reported solid earnings this season, are Intuitive Surgical (ISRG - Free Report) , Stryker Corporation (SYK - Free Report) and Merit Medical Systems, Inc. (MMSI - Free Report) . All the stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Intuitive Surgical reported third-quarter 2018 adjusted EPS of $2.83, which beat the Zacks Consensus Estimate of $2.65. Revenues totaled $920.9 million, also surpassing the consensus estimate of $918.6 million.

Stryker posted third-quarter 2018 adjusted EPS of $1.69, steering past the Zacks Consensus Estimate of $1.68. Operating margin was 17.8%, up 30 bps.

Merit Medical reported third-quarter 2018 adjusted EPS of 47 cents, which trumped the Zacks Consensus Estimate of 42 cents. Revenues of $221.6 million edged past the consensus estimate of $218 million.

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