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What's Behind Bio-Rad Laboratories' Q4 Earnings Miss

By Keith Speights - Feb 14, 2020 at 7:03AM

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Bio-Rad's Q4 revenue and earnings were disappointing, but its 2020 outlook looked good.

Bio-Rad Laboratories (BIO -0.28%) delivered a fantastic performance in 2019, with shares skyrocketing 59%. But so far this year, the stock hasn't gotten off to a great start.

The company announced its 2019 fourth-quarter and full-year results after the market closed on Thursday. Here are the highlights from Bio-Rad's Q4 update.

Female scientist in food science lab.

Image Source: Getty Images.

By the numbers

Bio-Rad reported revenue in the fourth quarter of $624.4 million. This reflected a 1.2% increase from the prior-year period revenue total of $616.8 million. The consensus Wall Street estimate projected Q4 revenue of $641.95 million.

The company announced net income of $553.5 million, or $18.31 per share, based on generally accepted accounting principles (GAAP). This marked a big improvement from the GAAP net loss of $828.5 million, or $27.73 per share, in the same period in 2018.

Bio-Rad posted adjusted net income in the fourth quarter of $70 million, or $2.32 per share. This was much better than the company's adjusted earnings of $63.1 million, or $2.09 per share. However, it came in lower than the average analyst earnings estimate of $2.44 per share.

Behind the numbers

The company's biggest moneymaker is its clinical-diagnostics segment. Net sales for this segment in Q4 totaled $379 million, up 1.6% year over year. This improvement would have been even better if not for foreign-exchange fluctuations. On a constant-currency basis, clinical diagnostics net sales rose 2% year over year. 

Bio-Rad's life-science segment delivered net sales in the fourth quarter of $242 million. This reflected a 1% increase from the prior-year period. The company attributed this growth primarily to higher sales for its Process Media, Droplet Digital PCR, and Food Safety products.

One key factor impacting Bio-Rad's financial performance in the fourth quarter was a cyberattack on its network in early December 2019. The company was forced to take some systems offline, but later resumed normal business operations.

The laboratory-service provider's bottom line was boosted significantly by the impact of changes in the fair market value of equity securities, especially Bio-Rad's stake in Sartorius AG. This change added $646 million to the company's Q4 net income.

Looking ahead

Bio-Rad CEO Norman Schwartz said: "Looking ahead to 2020, we expect another year of progress driven by a combination of healthy markets, new products, and a focus on operating efficiencies. We continue to pursue our goal of 20 percent adjusted EBITDA [earnings before interest, taxes, depreciation, and amortization] run rate by the end of the year."

The company projects full-year 2020 revenue growth of around 4.5% to 5.25% on a currency-neutral basis. Bio-Rad expects a non-GAAP operating margin between 13.8% and 14.3%. The company's full-year 2020 revenue guidance is in the ballpark of the consensus Wall Street estimate of $2.42 billion. Analysts also expect Bio-Rad to deliver full-year 2020 adjusted earnings of $8.54 per share.

Healthcare stocks, in general, could be negatively impacted by the U.S. presidential campaign. However, the nature of Bio-Rad's business should largely insulate the stock from any political uncertainties. 

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