Bio-Rad BIO continues to get affected by unfavorable macroeconomic conditions. Also, competitive headwinds and currency fluctuations pose a threat to the stock's value. The stock carries a Zacks Rank #4 (Sell) currently.
Bio-Rad’s first-quarter results were unfavorably impacted by increased sanctions in Russia, increased early-stage biotech companies’ pressure and persistent supply-chain challenges, including those associated with the transfer of manufacturing lines and ramp-up in Asia. Further, a significant decline in COVID-related sales resulted in a year-over-year decrease in the top line.
Asia posted a modest year-over-year decline in core revenues due to tough comparisons for the process chromatography franchise related to a very large customer order in the year-ago period. The company’s Life Science Group registered a 6.8% year-over-year decrease and a 3.6% decline on a currency-neutral basis.
The year-over-year currency-neutral core revenue growth in the underlying Life Science group was lower than Bio-Rad’s outlook. This was due to increased sanctions on sales of certain products to Russia and growing revenue headwind from biopharma companies due to the funding environment for early-stage biotech companies. The process chromatography business witnessed a slowdown in the quarter due to tough comparisons and some softness in the bioprocessing market.
During the first quarter, Bio-Rad’s gross margin contracted 397 basis points as a result of lower pandemic-related sales, an unfavorable product mix and a higher cost of raw materials. Operating expenses were up 17.3% year over year, resulting in a 57.7% decrease in the operating profit compared to the first quarter of 2022.
Bio-Rad Laboratories, Inc. Price
Bio-Rad Laboratories, Inc. price | Bio-Rad Laboratories, Inc. Quote
On a positive note, Bio-Rad exited the first quarter of 2023 with an earnings beat, while revenues almost matched estimates. Despite the year-over-year decline in COVID-19 sales, the company delivered more than 6% currency-neutral core sales growth in the first quarter. Clinical Diagnostics revenues increased 3.1% year over year, on a currency-neutral basis, driven by the strong demand for diagnostic instruments.
The demand for the newly launched QX600 ddPCR platform continued a strong trend line from the fourth quarter of 2022. From its growing pipeline, Bio-Rad is set to introduce the ddPCR microsatellite instability kit toward the end of the quarter. This expands the company’s oncology assay menu for Droplet Digital PCR.
Bio-Rad expects the demand momentum to continue across clinical systems and the Life Science business for the rest of the year. On the supply-chain front, the company anticipates clearing the extended Life Science backlog by the end of the second quarter and the clinical backlog by the end of the year.
Bio-Rad has been deriving more than 60% of its net sales from international markets. The company experienced currency-neutral year-over-year core revenue growth in the Americas and Europe, while Asia posted a modest decline. This was due to tough comparison for the process chromatography franchise related to a very large customer order in the year-ago period.
On a geographic basis, the Clinical Diagnostics group’s year-over-year currency-neutral core revenues posted double-digit growth in Asia. Meanwhile, currency-neutral core revenues were largely flat in the Americas and Europe compared to the year-ago period.
In the past year, Bio-Rad has outperformed its industry. The stock has declined 30.7% compared with the industry’s 34% fall.
Bio-Rad carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the broader medical space are Addus Homecare Corporation ADUS, Merit Medical Systems, Inc. MMSI and Hologic, Inc. HOLX.
The Zacks Consensus Estimate for Addus Homecare’s 2023 earnings indicates 10.9% year-over-year growth. The Zacks Consensus Estimate for ADUS’s 2023 earnings has moved 0.5% north in the past 30 days.
Addus Homecare has a long-term estimated growth rate of 11.8%. The stock carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Merit Medical reported first-quarter 2023 adjusted EPS of 64 cents, beating the Zacks Consensus Estimate by 16.4%. Revenues of $297.6 million surpassed the Zacks Consensus Estimate by 5.9%. It currently carries a Zacks Rank #2.
Merit Medical has a long-term estimated growth rate of 11%. MMSI’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 20.2%.
Hologic, carrying a Zacks Rank #2 at present, has an estimated growth rate of 5.1% for fiscal 2024. HOLX’s earnings surpassed estimates in all the trailing four quarters, the average being 27.3%.
Hologic has gained 5% against the industry’s 2.2% decline in the past year.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report