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Bruker (BRKR) Q1 Earnings Miss Estimates, Guidance Suspended

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Bruker Corporation (BRKR - Free Report) delivered adjusted earnings per share (EPS) of 14 cents in the first quarter of 2020, down 50% year over year. Moreover, the figure lagged the Zacks Consensus Estimate by 36.4%.

GAAP EPS for the quarter was 7 cents a share, marking a 65% decline from the year-earlier figure.

Revenues in Detail

Bruker registered revenues of $424 million in the first quarter, down 8.1% year over year. Further, the top line lagged the Zacks Consensus Estimate by 1.2%.

Excluding a positive impact of 0.9% from acquisitions and a 1.1% negative impact from changes in foreign currency rates, the company recorded organic revenue decline of 7.9% and decline of 9.2% at constant exchange rate (CER) year over year.

Bruker Corporation Price, Consensus and EPS Surprise

 

Bruker Corporation Price, Consensus and EPS Surprise

Bruker Corporation price-consensus-eps-surprise-chart | Bruker Corporation Quote


The fall in reported and organic revenues resulted from disruptions arising from the coronavirus pandemic and a 30% year-over-year revenue decline in China.

Geographically, the United States witnessed a 6.9% decline in revenues in the reported quarter. Also, revenues in the Asia Pacific fell 9.9% and the Other category’s revenues declined 10.9%. Further, Europe revenues fell 6.6% year over year.

Segments in Details

Bruker reports results under three segments — BSI Life Science (comprising BioSpin and CALID), BSI NANO and BEST.

In the first quarter, BioSpin Group revenues fell 5.4% from the year-ago quarter to $120.9 million due to the delay in certain deliveries and installations due to customer closures and COVID-19 disruptions. This sub-segment also saw a significant revenue decline in China.

CALID revenues were down 5.2% year over year to $140.5 million, primarily resulting from fall in molecular spectroscopy revenues. The decline more than offset the continued growth in microbiology and diagnostics and Life Science Mass Spectrometry.

Total BSI Life Science revenues were $261.4 million, down 5.3% year over year.

Revenues in the NANO group fell 14.7% to $120.1 million fueled by global disruptions due to the pandemic as well as lower industrial market demand.

Organic revenues and revenues at CER of the BSI segment (including BSI Life Science and BSI Nano Segments) declined 8.2% and 8.5% year over year, respectively.

In the first quarter, the company’s BEST segment’s revenues were $46.2 million, indicating a fall of 3.3% year over year resulting from lower demand for superconductor toward the quarter-end.

However, organically, the BEST segment revenues declined 4.3% year over year, net of intercompany eliminations. At CER, the segment fell 4.7%.

Margin Trend

In the quarter under review, Bruker’s gross profit fell 10.4% to $192.3 million. Gross margin contracted 118 basis points (bps) to 45.3%.

Meanwhile, selling, general & administrative expenses rose 0.9% to $121.2 million. Research and development expenses went up 4.5% year over year to $48.5 million. Adjusted operating expenses of $169.7 million rose 1.9% year over year.
Adjusted operating profit totaled $22.6 million, reflecting a 53.1% decline
from the prior-year quarter. Further, adjusted operating margin in the first quarter plunged 512 bps to 5.3%.

Financial Position

Bruker exited the first quarter with cash and cash equivalents, and short-term investments of $851.7 million compared with $684.9 million at the end of 2019. Long-term debt at the end of the first quarter was $914.8 million compared with $812.8 at the end of 2019.

At the end of the first quarter, cash flow from operating activities was $35 million compared with $14.2 million in the year-ago period.

2020 Guidance

Bruker, on Mar 27, suspended its 2020 financial guidance due to challenging business conditions created by the pandemic. However, the company expects to witness more pronounced negative impact on second-quarter 2020 results.

The company had expected to provide a business update during its first-quarter 2020 earnings conference call in early May 2020. However, it has not provided any guidance as of now.

Our Take

Bruker ended the first quarter with lower-than-expected results. Decline in revenues across all reporting segments as well as major geographies due to business disruptions is concerning. The contraction of both margins is concerning.

However, the company’s efforts to combat the pandemic are notable. In Bremen, the company’s Germany campus, Bruker is currently offering a pilot COVID-19 at work testing program for its factory workforce. The program, implemented in April, offers weekly company paid voluntary COVID-19 PCR tests to employees in the factory.

Further, the company is providing critical technologies and solutions to help check the crisis. The microbiology and infectious disease diagnostics portfolio has added a SARS-CoV-2 PCR test and the NMR and mass spec systems, which are used in critical disease, therapeutic and vaccine research.

However, we are upbeat about its focus on product development through higher R&D investment.

Zacks Rank and Stocks to Consider

Bruker currently carries a Zacks Rank #4 (Sell).

Some better-ranked stocks in the broader medical space are Aphria Inc. (APHA - Free Report) , Biogen Inc. (BIIB - Free Report) and Eli Lilly and Company (LLY - Free Report) .

Aphria reported third-quarter fiscal 2020 adjusted EPS of 2 cents, comparing favorably with the Zacks Consensus Estimate of a loss of 4 cents. Net revenues of $64.4 million outpaced the consensus estimate by 14.6%. The company carries a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Biogen currently carries a Zacks Rank #2. It reported first-quarter 2020 adjusted EPS of $9.14, surpassing the Zacks Consensus Estimate by 18.1%. Revenues of $3.53 billion outpaced the consensus mark by 3.2%.

Eli Lilly delivered first-quarter 2020 EPS of $1.75, outpacing the Zacks Consensus Estimate by 12.9%. Revenues of $145.3 million surpassed the consensus estimate by 6.3%. The company currently sports a Zacks Rank #1.

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