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Here's Why You Should Add Bio-Rad (BIO) to Your Portfolio Now

Bio-Rad Laboratories, Inc. BIO has been gaining on strength in international markets. Further, strong key product lines across major geographic regions buoy optimism. However, downsides may result from foreign exchange fluctuations and a difficult pricing scenario.

Over the past year, shares of this Zacks Rank #2 (Buy) company have outperformed the industry. The company has gained 61.2% compared with 11.6% growth of the industry 33.6% rise of the S&P 500.

The renowned manufacturer and global supplier of clinical diagnostics and life science research products has a market capitalization of $24.41 billion. The company projects 34.9% growth for the current year. The company surpassed estimates in all of the trailing four quarters, the average surprise being 71.56%.

Let’s delve deeper.

Focus on International Markets:  Of late, 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. Geographically, Bio-Rad experienced currency-neutral growth across Europe, Asia and United States regions. The company continued to see strong demand for products associated with COVID-19 testing and related research. In the Life Science business, all regions witnessed growth compared to the year-ago quarter. Further, the company’s Clinical Diagnostics segment registered double-digit growth across all of its product lines driven by a recovery in routine testing. The company also noted the continued gradual capacity improvement at both academic and diagnostic labs with returning to 90% and 95% of pre-COVID levels, respectively.

Segmental Growth: Bio-Rad witnessed sales growth of 32.6% at CER and reported growth of 27.1% for its Life Science segment in the second quarter of 2021. Growth at CER was primarily driven by a rise in demand for qPCR, Western Blotting, Droplet Digital PCR and Process Media products. The company witnessed strong growth in the biopharma market for the Droplet Digital PCR platform along with a healthy uptake for ddPCR in wastewater solutions.

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Further, Bio-Rad witnessed constant currency sales growth of 28% and reported growth of 34.3% at its Clinical diagnostics segment. The year-over-year growth was driven by recovery in routine testing. The company also started to see recovery of demand for non-COVID business, with diagnostics labs business returning to about 90-95% of pre-COVID levels.

Raised Guidance: We are optimistic about Bio-Rad’s raised 2021 guidance. The company now anticipates revenue growth of 10-10.5% for full-year 2021 compared with the previous guidance of 5.5-6%.

However, Bio-Rad derives more than 50% of its revenues from international markets, which exposes it to the effects of fluctuations in foreign currency. In the past several years, the company’s earnings were significantly affected by foreign exchange.

Moreover, Bio-Rad is exposed to the effects of changes in the healthcare industry of the United States and Europe. The changing trend toward managed care, healthcare reform of the delivery system in the United States, efforts to reform in Europe along with increasing consolidations among healthcare providers have resulted in increased pricing burden.

Estimate Trends

Bio-Rad has been witnessing a positive estimate revision trend for the current year. Over the past 90 days, the Zacks Consensus Estimate for its earnings has moved 17.6% north to $14.20.

The Zacks Consensus Estimate for its third-quarter 2021 revenues is pegged at $671 million, suggesting 3.7% growth from the year-ago reported number.

Other Key Picks

A few other similar-ranked stocks from the broader medical space are Envista Holdings Corporation NVST, BellRing Brands, Inc. BRBR and Henry Schein, Inc. HSIC, each carrying a Zacks Rank #2. You can see the complete list of Zacks #1 Rank (Strong Buy) stocks here.

Envista Holdings has an estimated long-term earnings growth rate of 27%.

BellRing Brands has an estimated long-term earnings growth rate of 29%.

Henry Schein has a projected long-term earnings growth rate of 14%.


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Henry Schein, Inc. (HSIC): Free Stock Analysis Report
 
BioRad Laboratories, Inc. (BIO): Free Stock Analysis Report
 
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