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QuidelOrtho (QDEL) Down 4.8% Since Last Earnings Report: Can It Rebound?

A month has gone by since the last earnings report for QuidelOrtho (QDEL). Shares have lost about 4.8% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is QuidelOrtho due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

QuidelOrtho Q4 Earnings Top Estimates, Margins Down

QuidelOrtho delivered adjusted earnings per share of $1.76 in the fourth quarter of 2022, down by 75.4% year over year. The figure topped the Zacks Consensus Estimate by 25.7%.

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The adjustments include expenses related to the amortization of intangibles, and acquisition and integration costs, among others.

Supplemental combined adjusted earnings per share for the quarter was $1.76, down 65.6% year over year.

GAAP earnings per share for the quarter was 45 cents, reflecting a 93.4% plunge from the year-earlier figure.

Full-year adjusted earnings per share was $14.91, down 13.4% compared to the end of 2021.

Revenues in Detail

QuidelOrtho registered revenues of $866.5 million in the fourth quarter, which climbed 36% year over year. The figure surpassed the Zacks Consensus Estimate by 0.7%.

Supplemental combined revenues in the reported quarter were $866.5 million, down by 25.2% on a reported basis and down 23.4% at CER.

Excluding COVID-19 revenue, supplemental combined revenues at CER improved 18.6%.

The year-over-year revenue surge was primarily led by the consummation of the business combination that occurred on May 27, 2022, between Quidel Corporation and Ortho Clinical Diagnostics Holdings plc.

Full-year revenues were $3.27 billion, reflecting a 92.3% improvement from the comparable 2021 period.

Segments in Detail

QuidelOrtho now derives revenues from four business units — POC, Labs, TM and MDx.

In the fourth quarter, POC revenues amounted to $374.7 million, reflecting a decline of 34.7% on a reported basis and down 34.4% at CER. However, excluding COVID-19 revenue, POC revenues at CER improved 137.5%.

Labs revenues were $314.7 million in the fourth quarter, down 13.4% and 10.9% on a reported basis and at CER, respectively. Excluding COVID-19 revenue, Labs revenues at CER declined 9.6%.

MDx revenues totaled $14.6 million in the fourth quarter, down 71.4% and 70.9% on a reported basis and at CER, respectively. However, excluding COVID-19 revenue, MDx revenues at CER increased 45.3%.

TM revenues were $162.5 million in the fourth quarter, down 4.2% on a reported basis but up 1.2% at CER.

Geographical Distribution

Geographically, QuidelOrtho derives revenues from North America, EMEA, China and Other regions.

Revenues from North America amounted to $619.2 million, reflecting a decline of 28.2% and 28.3% on a reported basis and at CER, respectively. However, excluding COVID-19 revenue, revenues at CER improved 38.3%.

EMEA revenues amounted to $75.8 million, reflecting a decline of 14.6% on a reported basis and 7.8% at CER. Excluding COVID-19 revenue, EMEA revenues at CER also declined 3.3%.

Revenues from China amounted to $56.9 million, reflecting a decline of 34.2% on a reported basis and down 27.3% at CER.

Revenues from Other regions amounted to $114.6 million, reflecting a decline of 4.9% on a reported basis but up 2.6% at CER. Excluding COVID-19 revenue, revenues at CER improved 7%.

Margin Trend

In the quarter under review, QuidelOrtho’s gross profit declined 8.6% to $449 million. The gross margin contracted by a huge 2531 basis points (bps) to 51.8%.

Selling, marketing and administrative expenses rose 189.8% to $213.6 million. Research and development expenses went up 146.4% year over year to $64.3 million. Adjusted operating expenses of $277.9 million surged 178.5% year over year.

Adjusted operating profit totaled $171.1 million, reflecting a 56.3% decline from the prior-year quarter’s level. Adjusted operating margin in the fourth quarter contracted a huge 4171 bps to 19.7%.

Financial Position

QuidelOrtho exited full-year 2022 with cash and cash equivalents of $292.9 million compared with $802.8 million at the end of 2021. Total debt (including short-term debt) at the end of 2022 was $2.64 billion compared with $0.7 million at the end of 2021.

Cumulative net cash flow from operating activities at the end of the full-year 2022 was $885.3 million compared with $805.9 million a year ago.

Guidance

QuidelOrtho has initiated its financial outlook for the full-year 2023.

Total revenues are expected to lie within $2.8 billion-$3.1 billion. The Zacks Consensus Estimate for the same stands at $2.77 billion.

Total revenue, excluding respiratory sales, is expected to lie within $2.21 billion-$2.25 billion.  At CER, it is likely to register an improvement of 4-6%.

Respiratory revenues for the full year are expected to lie within $610 million-$875 million. The respiratory revenues include COVID-related revenue of $300 million-$500 million, rapid flu revenue of $230 million-$270 million and other respiratory revenue of $80 million-$105 million.

Adjusted earnings per share is expected to lie within $5.00-$5.60. The Zacks Consensus Estimate for the same stands at $5.10.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in estimates review.

VGM Scores

At this time, QuidelOrtho has a poor Growth Score of F, however its Momentum Score is doing a lot better with a C. However, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, QuidelOrtho has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

Performance of an Industry Player

QuidelOrtho is part of the Zacks Medical - Products industry. Over the past month, Zimmer Biomet (ZBH), a stock from the same industry, has gained 0.3%. The company reported its results for the quarter ended December 2022 more than a month ago.

Zimmer reported revenues of $1.83 billion in the last reported quarter, representing a year-over-year change of -10.4%. EPS of $1.88 for the same period compares with $1.95 a year ago.

Zimmer is expected to post earnings of $1.66 per share for the current quarter, representing a year-over-year change of +3.1%. Over the last 30 days, the Zacks Consensus Estimate has changed +0.5%.

The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Zimmer. Also, the stock has a VGM Score of C.

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QuidelOrtho Corporation (QDEL) : Free Stock Analysis Report

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