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Bruker Outshines Q3 Earnings and Revenues, '15 EPS View Up

Bruker CorporationBRKR reported adjusted earnings per share (EPS) of 19 cents in the third quarter of 2015, up 35.7% year over year. Adjusted EPS also steered ahead of the Zacks Consensus Estimate by a significant 46.2%.

Improvements observed in Bruker's third quarter profitability, operating capabilities and fixed cost structure primarily contributed to the company's earnings upside. However, foreign exchange headwind, which impacted adjusted EPS to the tune of 2 cents, and a higher tax rate partially affected earnings growth.

Without one-time adjustments, Bruker reported net income of $11.8 million or 7 cents per share, reflecting a solid year-over-year increase of 114.5% or 133.3% respectively in the third quarter.

Bruker Corporation (BRKR) - Earnings Surprise | FindTheCompany

Revenues in Detail

Bruker reported revenues of $396.1 million in the third quarter, down 5.6% year over year but considerably ahead of the Zacks Consensus Estimate of $375 million. While divestitures negatively affected Bruker's third quarter revenues by 2.8%, foreign exchange rates dragged the same by 10.9%. Excluding these impacts, Bruker's organic revenues increased 8.1% on a year-over-year basis.

Margin Trends

Adjusted gross profit in the reported quarter dropped 1.5% to $182.7 million, on account of unfavorable foreign currency translation. Nevertheless, adjusted gross margin improved 190 basis points (bps) to 46.1%, owing to a positive impact of currency translation. Benefits from Chemical and Applied Markets (CAM) division restructuring, higher volume and a more profitable product mix also contributed to gross margin growth.

Selling, general & administrative expenses declined 11% to $96.1 million and research and development expenses fell 18.5% to $34.3 million. As a result, adjusted operating income improved 115.7% year over year to $37.1 million. Consequently, adjusted operating margin also expanded 530 bps to 9.4% in the quarter.

Financial Position

Bruker exited the reported quarter with cash and cash equivalents of $331 million, reflecting an improvement from $320.8 million at the end of the second quarter of 2015. In the third quarter, net cash flow from operating activities was $54.1 million, a massive improvement from the year-ago equivalent of $13.5 million.

Free cash flow was $44.7 million in the third quarter, compared to $3.6 million in the prior-year period. Higher reported net income, along with lower restructuring costs, lower depreciation and amortization, and improved working capital efficiency, contributed to the free cash flow increase.

Guidance

Buoyed by its strong performance in the third quarter, Bruker increased its guidance for full-year 2015 adjusted operating margin and EPS. While the company continues to expect to generate organic revenue growth of approximately 1%, based on its year-to-date profitability improvement; management now expects adjusted operating margin expansion of 150 bps or more, compared to the previous guidance of 100 bps or higher.

On the bottom-line front, Bruker expects 2015 adjusted EPS in the range of 75-80 cents compared to the previous guidance of approximately 75 cents.

The current Zacks Consensus Estimate for 2015 revenues is pegged at $1.6 billion, while the same for EPS is pegged at 75 cents.

Our Take

Bruker ended the third quarter of 2015 on a positive note, with its financials squarely beating the Zacks Consensus Estimate. However, the top line failed to generate positive growth on a year-over-year basis.

Nevertheless, the fact that the revenue decline was primarily driven by unfavorable currency fluctuation and not some inherent weakness in the company's operations, offers hope. Further, the progress in Bruker's operational activities, as evident from the enhanced margin figures, buoys optimism.

However, a respite from unfavorable currency translations in the international market looks unlikely over the near term. This is evident from management's expectation that currency exchange will reduce Bruker's revenues by approximately 10% for full-year 2015.

Zacks Rank

Bruker currently has a Zacks Rank #3 (Hold). Some better-ranked medical instrument stocks are Cesca Therapeutics Inc. KOOL , EDAP TMS SA EDAP and Masimo Corporation MASI . All the three stocks sport a Zacks Rank #1 (Strong Buy).

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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