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Here's Why You Should Retain Bio-Rad (BIO) Stock For Now
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Bio-Rad Laboratories, Inc. (BIO - Free Report) has been gaining from solid recovery in most of its key global markets as well as an uptick in demand for COVID-related products. The company’s focus on the international market is encouraging. However, escalating expenses and foreign exchange headwinds do not bode well.
Over the past year, shares of this Zacks Rank #3 (Hold) company have lost 13.6% compared with the 20.8% fall of the industry it belongs to and 6.3% surge of the S&P 500 composite.
The renowned manufacturer and global supplier of clinical diagnostics and life science research products has a market capitalization of $16.19 billion. The company’s earnings have surpassed estimates in the trailing four quarters, the average surprise being 66.97%.
Let’s delve deeper.
Key Growth Catalysts
Clinical Diagnostics Continues to Gain Momentum: Bio-Rad’s fourth-quarter 2021 clinical diagnostics sales were primarily driven by a recovery in routine testing. The Diagnostics Group posted growth across its product lines during the fourth quarter. The year-over-year growth was driven by a recovery of routine testing, which is now generally approaching pre-COVID levels.
In June 2021, Bio-Rad recently teamed up with Seegene -- a global provider of multiplex molecular diagnostics. Bio-Rad will exclusively market the Seegene tests in the United States, pending regulatory approvals. The partnership with Seegene is intended to provide required diagnostic testing products to the U.S. markets.
Focus on International Markets: In recent times, Bio-Rad has been deriving more than 60% of its net sales from international markets. Europe happens to be the largest international market for the company. On a geographic basis, the Diagnostics group’s currency-neutral year-over-year sales grew mid-single digits in the Americas and double-digits in Europe and Asia. In the Life Science business, all regions witnessed growth compared with the year-ago quarter.
Image Source: Zacks Investment Research
Strong Solvency & Balance Sheet: Bio-Rad exited 2021 with cash and cash equivalents (including short-term investments) of $875 million compared with $997 million at the end of 2020. Total debt (including current maturities) at the end of 2021 was $11 million compared with $14.1 million at the end of 2020. This figure is much lower than the quarter-end cash and cash equivalent and investments level, indicating strong solvency. This is good news in terms of the company's solvency position, at least during the year of economic downturn, implying that the company is holding sufficient cash for debt repayment.
Downsides
Mounting Expenses: During the fourth quarter, Bio-Rad’s operating expenses rose 3.2% year over year. The year-over-year rise in operating costs is building pressure on the bottom line. Further, operating margin in the fourth quarter contracted 759 basis-points to 14.6%.
Tough Competitive Pressure: Bio-Rad operates in a highly competitive environment dominated by firms varying from large multinational corporations with significant resources to start-ups. Also, the competitive and regulatory conditions in the company’s markets limit Bio-Rad’s ability to switch to strategies like price increases and other drivers of cost increases.
Estimate Trends
Over the past 90 days, the Zacks Consensus Estimate for Bio-Rad’s 2023 earnings per share has moved 6.5% north to $15.55.
The Zacks Consensus Estimate for its 2023 revenues is pinned at $3.09 billion, suggesting 7% growth from the year-ago reported number.
Key Picks
A few better-ranked stocks from the broader medical space that investors can consider are AMN Healthcare Services, Inc. (AMN - Free Report) , STERIS plc (STE - Free Report) and Abiomed, Inc. .
AMN Healthcare has an estimated long-term growth rate of 16.2%. AMN Healthcare’s earnings surpassed the Zacks Consensus Estimate in the trailing four quarters, the average surprise being 20%. It currently flaunts a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
AMN Healthcare has gained 39.7% against the industry’s 58.5% fall over the past year.
STERIS, carrying a Zacks Rank #2 (Buy), has an estimated long-term growth rate of 11.3%. STERIS’ earnings surpassed estimates in three of the trailing four quarters, the average surprise being 6.34%.
STERIS has gained 15.5% against the industry’s 6.6% fall over the past year.
Abiomed surpassed earnings estimates in each of the trailing four quarters, the average surprise being 9.2%. The company currently carries a Zacks Rank #2.
Abiomed’s long-term earnings growth rate is estimated at 20%. ABMD’s earnings yield of 1.5% compares favorably against the industry’s (6.4%).
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Here's Why You Should Retain Bio-Rad (BIO) Stock For Now
Bio-Rad Laboratories, Inc. (BIO - Free Report) has been gaining from solid recovery in most of its key global markets as well as an uptick in demand for COVID-related products. The company’s focus on the international market is encouraging. However, escalating expenses and foreign exchange headwinds do not bode well.
Over the past year, shares of this Zacks Rank #3 (Hold) company have lost 13.6% compared with the 20.8% fall of the industry it belongs to and 6.3% surge of the S&P 500 composite.
The renowned manufacturer and global supplier of clinical diagnostics and life science research products has a market capitalization of $16.19 billion. The company’s earnings have surpassed estimates in the trailing four quarters, the average surprise being 66.97%.
Let’s delve deeper.
Key Growth Catalysts
Clinical Diagnostics Continues to Gain Momentum: Bio-Rad’s fourth-quarter 2021 clinical diagnostics sales were primarily driven by a recovery in routine testing. The Diagnostics Group posted growth across its product lines during the fourth quarter. The year-over-year growth was driven by a recovery of routine testing, which is now generally approaching pre-COVID levels.
In June 2021, Bio-Rad recently teamed up with Seegene -- a global provider of multiplex molecular diagnostics. Bio-Rad will exclusively market the Seegene tests in the United States, pending regulatory approvals. The partnership with Seegene is intended to provide required diagnostic testing products to the U.S. markets.
Focus on International Markets: In recent times, Bio-Rad has been deriving more than 60% of its net sales from international markets. Europe happens to be the largest international market for the company. On a geographic basis, the Diagnostics group’s currency-neutral year-over-year sales grew mid-single digits in the Americas and double-digits in Europe and Asia. In the Life Science business, all regions witnessed growth compared with the year-ago quarter.
Strong Solvency & Balance Sheet: Bio-Rad exited 2021 with cash and cash equivalents (including short-term investments) of $875 million compared with $997 million at the end of 2020. Total debt (including current maturities) at the end of 2021 was $11 million compared with $14.1 million at the end of 2020. This figure is much lower than the quarter-end cash and cash equivalent and investments level, indicating strong solvency. This is good news in terms of the company's solvency position, at least during the year of economic downturn, implying that the company is holding sufficient cash for debt repayment.
Downsides
Mounting Expenses: During the fourth quarter, Bio-Rad’s operating expenses rose 3.2% year over year. The year-over-year rise in operating costs is building pressure on the bottom line. Further, operating margin in the fourth quarter contracted 759 basis-points to 14.6%.
Tough Competitive Pressure: Bio-Rad operates in a highly competitive environment dominated by firms varying from large multinational corporations with significant resources to start-ups. Also, the competitive and regulatory conditions in the company’s markets limit Bio-Rad’s ability to switch to strategies like price increases and other drivers of cost increases.
Estimate Trends
Over the past 90 days, the Zacks Consensus Estimate for Bio-Rad’s 2023 earnings per share has moved 6.5% north to $15.55.
The Zacks Consensus Estimate for its 2023 revenues is pinned at $3.09 billion, suggesting 7% growth from the year-ago reported number.
Key Picks
A few better-ranked stocks from the broader medical space that investors can consider are AMN Healthcare Services, Inc. (AMN - Free Report) , STERIS plc (STE - Free Report) and Abiomed, Inc. .
AMN Healthcare has an estimated long-term growth rate of 16.2%. AMN Healthcare’s earnings surpassed the Zacks Consensus Estimate in the trailing four quarters, the average surprise being 20%. It currently flaunts a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
AMN Healthcare has gained 39.7% against the industry’s 58.5% fall over the past year.
STERIS, carrying a Zacks Rank #2 (Buy), has an estimated long-term growth rate of 11.3%. STERIS’ earnings surpassed estimates in three of the trailing four quarters, the average surprise being 6.34%.
STERIS has gained 15.5% against the industry’s 6.6% fall over the past year.
Abiomed surpassed earnings estimates in each of the trailing four quarters, the average surprise being 9.2%. The company currently carries a Zacks Rank #2.
Abiomed’s long-term earnings growth rate is estimated at 20%. ABMD’s earnings yield of 1.5% compares favorably against the industry’s (6.4%).