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Bio-Rad (BIO) Q3 Earnings Surpass Estimates, Margins Down

Bio-Rad Laboratories, Inc. BIO posted third-quarter 2022 adjusted earnings per share (EPS) of $2.60, which surpassed the Zacks Consensus Estimate by 0.4%. However, the bottom line fell 29.9% from the prior-year quarter.

Our projection of adjusted EPS was $2.59.

The quarter’s adjustments eliminate the impacts of certain non-recurring items like amortization of purchased intangibles, (gains) losses from the change in the fair market value of equity securities and loan receivable, restructuring costs and others.

The GAAP loss of the company was $5.52 per share in the third quarter against GAAP earnings of $129.96 in the year-ago quarter.

Revenues in Detail

Revenues of $680.8 million in the quarter missed the Zacks Consensus Estimate by 1.3%. Revenues declined 8.9% from the year-ago quarter (down 4.1% at the constant exchange rate or CER). The company reported COVID-related revenues of $17 million, a significant decline from $57 million reported a year ago.

Our estimate for third-quarter revenues was $694.6 million.

Segmental Analysis

Sales at the Life Science segment in the third quarter totaled $317.9 million, down 14.9% year over year and down 11% at CER. The sales decline was primarily due to lower COVID-related sales, legal settlements in the year-ago period, and continuing supply chain constraints.

BioRad Laboratories, Inc. Price, Consensus and EPS Surprise

BioRad Laboratories, Inc. Price, Consensus and EPS Surprise
BioRad Laboratories, Inc. Price, Consensus and EPS Surprise

BioRad Laboratories, Inc. price-consensus-eps-surprise-chart | BioRad Laboratories, Inc. Quote

Our projection for the Life Science segment’s Q3 sales was $361.5 million.

Net sales at the Clinical Diagnostics segment totaled 361.9 million, down 2.8% on a year-over-year basis but up 3% at CER. Growth in the quality control, blood typing, and infectious disease product lines primarily drove the increase in revenues at CER.

For the Clinical Diagnostics segment, we estimated $389.1 million of revenues in the third quarter.

Margins

In the quarter under review, Bio-Rad’s gross profit fell 14.5% to $373.8 million. Gross margin contracted 365 basis points (bps) to 54.9%. Per the company, the adjusted gross margin was 55.7%, contracting 220 bps year over year.

We projected an adjusted gross margin of 55.7% for Q3.

Operating expenses were $280.9 million in the third quarter, up 0.1% year over year. Operating profit totaled $92.8 million, reflecting a 40.8% decline from the prior-year quarter. The operating margin in the third quarter contracted 736 bps to 13.6%.

Meanwhile, the company-adjusted operating margin was 15.5%, down 390 bps year over year.

The adjusted operating margin, according to our model, was 16% for Q3.

Financial Update

Bio-Rad exited the third quarter of 2022 with cash and cash equivalents (including short-term investments) of 517.9 million compared with $$1.97 billion at the end of the second quarter of 2022. Total debt (including current maturities) at the end of the third quarter of 2022 was $1.19 billion, more or less flat from the second quarter of 2022.

Cumulative net cash flow from operating activities at the end of third-quarter 2022 was $104 million compared with the year-ago figure of $498.6 million.

2022 Guidance

Bio-Rad updated its guidance for full-year 2022.

The company continues to anticipate currency-neutral revenue growth to be at the high end of the earlier-projected band of 1-2%. Covid-related revenues are now expected to be $105 million compared with the earlier projection of $93 million. The Zacks Consensus Estimate for revenues is pegged at $2.85 billion.

The adjusted operating margin projection for the full year was reiterated at 19%.

Our Take

Bio-Rad exited the third quarter of 2022 with better-than-expected earnings with revenues missing the mark. The third-quarter decline in revenues was mainly the result of lower COVID-related sales compared with the year-ago period. Further, the receipt of the one-time $32 million settlement for bank royalties in the year-ago period made the year-over-year comparison tough. Core revenues in the Americas were largely flat as a result of the supply chain constraints.

On a positive note, Bio-Rad experienced currency-neutral year-over-year core revenue growth in Europe and Asia. The company is currently observing higher production volumes and anticipates reductions of order backlog through the remainder of 2022.

Zacks Rank and Key Picks

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

Some better-ranked stocks in the broader medical space that have announced quarterly results are Elevance Health Inc. ELV, Medpace Holdings, Inc. MEDP and Centene Corporation CNC.

Elevance Health, carrying a Zacks Rank #2 (Buy), reported third-quarter 2022 adjusted EPS of $7.53, which beat the Zacks Consensus Estimate by 6.1%. Revenues of $39.63 billion outpaced the consensus mark by 1.3%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Elevance Health has an estimated long-term growth rate of 12%. ELV’s earnings surpassed estimates in all the trailing four quarters, the average being 4.1%.

Medpace Holdings, sporting a Zacks Rank #1, reported third-quarter 2022 EPS of $2.05, which beat the Zacks Consensus Estimate by 39.5%. Revenues of $383.7 million outpaced the consensus mark by 8.1%.

Medpace Holdings has an estimated growth rate of 29.7% for full-year 2022. MEDP’s earnings surpassed estimates in all the trailing four quarters, the average being 22%.

Centene, carrying a Zacks Rank #2, reported third-quarter 2022 adjusted EPS of $1.30, which beat the Zacks Consensus Estimate by 6.6%. Revenues of $35.87 billion outpaced the consensus mark by 1.1%.

Centene has an estimated long-term growth rate of 14.2%. CNC’s earnings surpassed estimates in all the trailing four quarters, the average being 5.2%.


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