Yahoo Finance Is It Wise to Hold Bio-Rad (BIO) Stock in Your Portfolio Now?
Bio-Rad Laboratories, Inc.’s BIO growth in the upcoming quarters is likely to be backed by its Digital PCR business, which boasts a strong pipeline. The company’s Clinical Diagnostics arm is seeing increased demand for quality control, blood typing and diabetes products. Sound financial stability also appears encouraging. However, the impact of macroeconomic challenges on Bio-Rad’s operations poses a concern. Persistent reduced demand in the Biopharma segment adds to the worry.
In the past year, shares of this Zacks Rank #3 (Hold) company have dropped 22.1% compared with the 1.7% fall of the industry and a 25.6% rise 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 $8.24 billion.
In the past five years, the company registered earnings growth of 15.6%, way ahead of the industry’s 3.9% rise. Bio-Rad’s earnings surpassed estimates in three of the trailing four quarters and missed in one, the average surprise being 4.2%.
Let’s delve deeper.
Key Drivers
Digital PCR Business Backs Growth: The pipeline of Bio-Rad’s QX600 Droplet Digital PCR (ddPCR) platform is currently robust and growing. Backed by the tremendous customer response, the company continues to ramp up production capacity to accommodate the ongoing demand. In the first quarter of 2024, within Life Science Group, academic and government sales were strong in the Americas, encouraged by several noteworthy announcements involving ddPCR.
The company’s collaboration agreements with Allegheny Health Network and Oncocyte Corporation are advancing its strategy and accelerating the platform's penetration into advanced clinical diagnostic applications. Additionally, Bio-Rad unveiled a novel multiplex mutation detection test that offers a thorough status readout of mutations in ESR-1, a crucial gene in breast cancer. The first reaction this assay has received has the firm quite excited.
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Clinical Diagnostics Continues to Gain Momentum: Within this business, the company’s diabetes franchise is seeing elevated growth and a substantial improvement in the immunohematology and quality control businesses. Bio-Rad recently launched the IH-500 next instrument, designed to enhance the functionality of the system, along with increased security from potential cyberattacks. The platform update, which includes updated software, increases the competitiveness of the company’s transfusion medicine portfolio.
In the first quarter of 2024, the growth of the clinical diagnostics group was primarily backed by increased demand for quality controls, blood typing and diabetes on a geographic basis.
Favorable Liquidity: Bio-Rad exited the first quarter of 2024 with cash and cash equivalents (including short-term investments) of $1.65 billion compared with $1.61 billion at the end of the fourth quarter of 2023. Total debt (including current maturities) at the end of the first quarter was $1.19 billion, almost in line with the sequential figure but below the cash position. This indicates a strong financial footing for the company.
Downsides
Economic Concerns Pressuring Margins: In recent times, Bio-Rad’s margin performance has been affected by the inflationary trend of elevated raw material costs, increased logistics costs and higher employee-related expenses. These macroeconomic factors, particularly the ongoing labor unrest, rising wages and raw material costs, along with ongoing geopolitical unrest, are leading to a significant escalation in the company’s operating expenses.
Soft Biopharma Segment: Since the beginning of 2023, Bio-Rad has been witnessing softness in smaller BioPharma companies, where historically, demand for life science products has been strong. This directly correlates with the funding constraints the broader pharmaceutical industry had started to experience. Management puts forth that BioPharma’s softness has resulted in the Life Science Segment’s growth at a slower pace. In the first quarter of 2024, negative BioPharma macro trends persisted.
Estimate Trends
The Zacks Consensus Estimate for Bio-Rad’s 2024 earnings per share (EPS) has moved upward to $10.80 from $10.42 in the past 30 days.
The Zacks Consensus Estimate for the company’s 2024 revenues is pegged at $2.69 billion, which indicates a 0.7% rise from the year-ago reported number.
Key Picks
Some better-ranked stocks in the broader medical space are Hims & Hers Health HIMS, Medpace MEDP and ResMed RMD.
Hims & Hers Health’s earnings are expected to surge 272.7% in 2024 compared with the industry’s 17.7%. HIMS’ earnings surpassed estimates in three of the trailing four quarters and missed in one, delivering an average surprise of 79.2%. Its shares have surged 165.9% against the industry’s 27% decline in the past year.
HIMS sports a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Medpace, carrying a Zacks Rank #2 (Buy) at present, has an estimated 2024 earnings growth rate of 27.1% compared with the industry’s 12.7%. Shares of MEDP have rallied 81.7% compared with the industry’s 5% growth over the past year.
MEDP’s earnings surpassed estimates in each of the trailing four quarters, delivering an average surprise of 12.8%. In the last reported quarter, it delivered an earnings surprise of 30.6%.
ResMed, also carrying a Zacks Rank #2 at present, has an estimated fiscal 2024 earnings growth rate of 19.6% compared with the industry’s 13.5%. Shares of RMD have dropped 1.6% compared with the industry’s 1.7% fall over the past year.
RMD’s earnings surpassed estimates in three of the trailing four quarters and missed in one, delivering an average surprise of 2.8%. In the last reported quarter, it delivered an earnings surprise of 10.9%.
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