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Bio-Rad Rides on International Expansion Amid Cost Concerns

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On Apr 8, we issued an updated research report on Bio-Rad Laboratories, Inc. (BIO - Free Report) . The company’s traction from solid prospects in the blood-typing market makes us optimistic, while a shrinking gross margin is a concern. The stock currently carries a Zacks Rank #3 (Hold).

This California-based manufacturer and global supplier of clinical diagnostics and life-science research products has been outperforming its industry for the past three months. The stock has rallied 23.5% compared with the industry’s 9.7% rise. 

Bio-Rad witnessed solid revenue growth at both its operating segments in the fourth quarter of 2019. Strength in many of its key product lines across major geographic regions buoys optimism. The uptick in demand for the fully-integrated QX ONE system after its launch in the fourth quarter is also a driving factor.

Strong revenue growth in the Life Sciences and Clinical Diagnostics segments in the December-end quarter was encouraging. Improvement in the Life Sciences segment was primarily driven by significant growth in Process Media, Droplet Digital PCR and Food Safety products, which registered 1.8% currency-neutral revenue growth.

The Clinical Diagnostics segment registered 2.8% revenue uptick at CER, driven by solid growth in Quality Controls, Diabetes, Autoimmune, and Blood Typing products across Asia and the Americas.

Geographically, the company’s growth was led by strength in North America and Europe. We note that Europe happens to be the largest international market for the company. In the fourth quarter, each of the company’s key product segments recorded overall growth across the three major geographies of America, Europe and Asia.

However, the Asia revenues partially suffered on the poor performance of the Life Sciences segment due to the negative impact of a cyber-attack last December. Escalating costs and expenses are straining this segment’s margins. Also, constant foreign-exchange woes and operation in a highly competitive market raise concerns. Macroeconomic woes stemming from the coronavirus pandemic is another headwind.

Key Picks

Some better-ranked stocks in the broader medical space are ResMed Inc. (RMD - Free Report) , National Vision Holdings, Inc. (EYE - Free Report) and Surmodics, Inc. (SRDX - Free Report) .

ResMed has a projected long-term earnings growth rate of 14.4%. It currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

National Vision’s long-term earnings growth rate is estimated at 10.7%. The company presently holds a Zacks Rank of 2.

Surmodics’ long-term earnings growth rate is estimated at 10%. It currently carries a Zacks Rank #2.

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