Bruker (BRKR) Q2 Earnings Surpass Estimates, Margins Fall

Bruker Corporation BRKR delivered adjusted earnings per share (EPS) of 21 cents in the second quarter of 2020, down 36.4% year over year. However, the figure surpassed the Zacks Consensus Estimate of 5 cents.

The adjustments include expenses related to purchased intangible amortization and restructuring costs.

GAAP EPS for the quarter was 16 cents a share, marking a 30.4% decline from the year-earlier figure.

Revenues in Detail

Bruker registered revenues of $424.6 million in the second quarter, down 13.4% year over year.

Excluding a positive impact of 0.4% from acquisitions and a 1.1% negative impact from changes in foreign currency rates, the company recorded organic revenue decline of 12.7% and a 14.5% drop at constant exchange rate (CER) year over year.

Bruker Corporation Price, Consensus and EPS Surprise

  Bruker Corporation Price, Consensus and EPS Surprise

Bruker Corporation price-consensus-eps-surprise-chart | Bruker Corporation Quote

The fall in reported and organic revenues resulted from business disruptions across the globe and softer global instrumentation demand arising from the pandemic.

Geographically, the United States witnessed an 18.7% decline in revenues in the reported quarter. Also, revenues in the Asia Pacific fell 11.5% and the Other category’s revenues declined 28.2%. Further, Europe revenues fell 7.2% year over year.

Segments in Details

Bruker reports results under three segments — BSI Life Science (comprising BioSpin and CALID), BSI Nano and BEST.

In the second quarter, BioSpin Group revenues fell 17.1% from the year-ago quarter to $125.1 million due to the pandemic-led customer loss and installation delays along with the temporary closure of one of BioSpin's manufacturing sites.

CALID revenues were down 5.6% year over year to $132.7 million, primarily resulting from fall in molecular spectroscopy revenues. However, the decline was partially offset by continued growth in Daltonics Life Science mass spectrometry, microbiology and infectious disease diagnostics business. CALID's microbiology and infectious disease consumables, which include the MALDI Biotyper Consumables and Bruker Hain nucleic acid extraction and COVID-19 Polymerase Chain Reaction assays, recorded significant growth year over year.

Total BSI Life Science revenues were $291.4 million, down 11.5% year over year.

Revenues in the Nano group fell 16.9% to $125.5 million due to global academic customer closures due to the pandemic, weaker industrial markets demand and temporary factory closures at some of Nano's businesses.

Organic revenues and revenues at CER of the BSI segment (including BSI Life Science and BSI Nano Segments) declined 12.7% and 13.4% year over year, respectively.

In the second quarter, the company’s BEST segment’s revenues were $44.8 million, indicating a fall of 13.7% year over year resulting from lower demand for superconductor toward the quarter-end.

However, organically, the BEST segment revenues declined 12.5% year over year, net of intercompany eliminations. At CER, the segment fell 13.6%.

Margin Trend

In the quarter under review, Bruker’s gross profit fell 19.2% to $186.2 million. Gross margin contracted 315 basis points (bps) to 43.9%.

Meanwhile, selling, general & administrative expenses fell 17.8% to $102.4 million. Research and development expenses went down 9.1% year over year to $44.1 million. Adjusted operating expenses of $146.5 million declined 15.3% year over year.

Adjusted operating profit totaled $39.7 million, reflecting a 30.8% decline from the prior-year quarter. Further, adjusted operating margin in the second quarter contracted 236 bps to 9.3%.

Financial Position

Bruker exited the second quarter with cash and cash equivalents, and short-term investments of $796.8 million compared with $851.7 million at the end of the first quarter. Long-term debt at the end of the second quarter was $924.2 million compared with $914.8 million at the end of the first quarter of 2020.

Cumulative net cash flow from operating activities at the end of the second quarter was $46.8 million compared with $24.8 million in the year-ago period.

The company incurred expenses of $12.3 million as payment of dividends to common stockholders and repurchased $50 million worth of stocks for the first six months of 2020. As of Jun 30, Bruker had $107.7 million remaining under its share repurchase authorization.

2020 Guidance

Bruker’s 2020 financial guidance remains suspended due to challenging business conditions created by the pandemic. However, the company expects to witness a sequential improvement in financial results in the third quarter of 2020 despite the expectation of a continued negative year-over-year impact of the pandemic on the third quarter results.

Our Take

Bruker ended the second quarter with better-than-expected earnings. However, year-over-year decline in revenues across all reporting segments as well as major geographies due to business disruptions is concerning. Contraction of both margins is discouraging as well. The company’s inability to provide any financial guidance also raises apprehensions.

On a positive note, the successful installation and customer acceptance of the Avance NEO1.2 GHzNMR system at the CERM of the University of Florence and the Department of Chemistry and Applied Biosciences of the Eidgenössische Technische Hochschule Zürich in Switzerland bode well. Further, the launch of the world’s first commercial MALDI-2 post-ionization source, now available as an option on the timsTOF fleX ESI/MALDI mass spectrometer, instills optimism in the stock.

Zacks Rank and Other Key Picks

Bruker currently carries a Zacks Rank #2 (Buy).

A few other top-ranked stocks in the broader medical space are West Pharmaceutical Services, Inc. WST, Thermo Fisher Scientific Inc. TMO and Hologic, Inc. HOLX.

West Pharmaceutical reported second-quarter 2020 adjusted EPS of $1.25, beating the Zacks Consensus Estimate by 37.4%. Net revenues of $527.2 million outpaced the consensus estimate by 6.9%. It currently flaunts a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Thermo Fisher, a Zacks Rank #2 company, reported second-quarter 2020 adjusted EPS of $3.89, beating the Zacks Consensus Estimate by 45.7%. Revenues of $6.92 billion outpaced the consensus mark by 0.1%.

Hologic reported reported third-quarter fiscal 2020 adjusted EPS of 75 cents, surpassing the Zacks Consensus Estimate by a stupendous 108.3%. Net revenues of $822.9 million exceeded the Zacks Consensus Estimate by 37.1%. It currently sports a Zacks Rank #1.

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