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QIAGEN (QGEN) Q2 Earnings In Line With Estimates, Margins Up

QIAGEN N.V.’s QGEN second-quarter 2020 adjusted earnings per share (EPS) were 55 cents, up 66.7% year over year (up 69.7% at constant exchange rate or CER). The figure was in line with the Zacks Consensus Estimate.

Notably, the bottom line matched the low end of the company’s preliminary earnings projection of 55-56 cents at CER, announced on Jul 9, 2020.

The adjustment excludes the impact of certain non-recurring items like business integration, acquisition and restructuring related expenses, and purchased intangibles amortization expenses, among others.

GAAP EPS for the quarter was 38 cents per share, up 100% year over year.

Revenues in Detail

Net sales at actual rates in the second quarter rose 16.2% on a year-over-year basis to $443.3 million (up 19% at CER). Also, the top line exceeded the Zacks Consensus Estimate by a marginal 0.1%.

Notably, the top line was in line with the company’s preliminary results.

Robust sales were recorded on significant demand for testing solutions used in the COVID-19 pandemic. However, there were weaker customer demand trends in other business arms of the company.

QIAGEN N.V. Price, Consensus and EPS Surprise

 

QIAGEN N.V. Price, Consensus and EPS Surprise

QIAGEN N.V. price-consensus-eps-surprise-chart | QIAGEN N.V. Quote

Geographical Revenue Update

In the quarter under review, sales from the Americas (40% of revenues) totaled $177 million, down 2% on a reported basis (down 1% at CER).

Revenues from Europe-Middle East-Africa (37% of revenues) rose 40% reportedly (up 44% at CER) to $164 million.

Further, revenues from Asia-Pacific/Japan (23% of revenues) rose 20% year over year on a reported basis (up 23% at CER) to $99 million.

Segmental Details

As of the second quarter of 2020, QIAGEN has two major customer classes which are Molecular Diagnostics (that includes human healthcare including Precision Medicine and companion diagnostics) and Life Sciences (that includes Pharma and Academia/Applied Testing).

Molecular Diagnostics (representing 46% of net sales) revenues were up 9% on a reported basis (up 12% at CER) to $204 million.

Life Sciences (54% of total revenues) reported revenues of $239 million, up 23% on a reported basis (up 25% at CER).

Sales derived from Applied Testing/Academia rose 39% on a reported basis (up 42% at CER) to $164 million. Pharma sales, however, dropped 1% on a reported basis (unchanged at CER) in the second quarter to $75 million.

Operational Update

Adjusted gross profit in the quarter under review rose 16.7% to $309.9 million. Adjusted gross margin expanded 31 basis points (bps) to 69.9% despite a 14.9% rise in adjusted cost of revenues (adjusting for acquisition-related intangible amortization) to $133.3 million.

Adjusted operating income (excluding items like acquisition-related intangible amortization, restructuring and integration, asset impairment) rose 69.1% year over year to $159.9 million in the second quarter. Adjusted operating margin expanded a huge 1129 bps to 36.1%.

Financial Update

QIAGEN exited the second quarter of 2020 with cash and cash equivalents, and short-term investments of $744.2 million, up from $744.7 million at the end of the first quarter. Long-term debt (including current portion) was $ 1.705 billion at the second quarter of 2020, compared with $1.712 billion in the preceding quarter.

Cumulative net cash flow from operating activities at the end of the second quarter of 2020 was $150.6 million compared with $127.2 million a year ago.

Capital expenditure in the reported quarter was $50.2 million, down from the year-ago $54.4 million. The company reported free cash outflow of $100.4 million at the end of the second quarter compared with $72.9 million a year ago.

The company spent $74.4 million on its share repurchase program and $430 million for redemption of the 2019 convertible notes over the first six months of 2020.

Our Take

QIAGEN exited the second quarter of 2020 with better-than-expected revenues and in-line earnings. It registered revenue growth across majority of its geographies and both its operating segments in the second quarter. Instrument sales were robust on the company’s platforms, which include the QIAsymphony automation system and QIAcube line of sample processing instruments. Sales of consumables and related revenues remained robust mainly due to strength in demand for products used in coronavirus testing. Expansion of both margins is encouraging as well.

In April, QIAGEN received the FDA’s approval for its therascreen BRAF V600E RGQ Polymerase Chain Reaction Kit (therascreen BRAF V600E) as a companion diagnostic to the BRAF inhibitor, BRAFTOVI (encorafenib), followed by the subsequent launch of the kit. In May, QIAGEN launched novel solutions to enable faster and better analysis of genomic variations in cancer. The regulatory approval and the acceleration of multiple applications of Precision Medicine look encouraging. The accelerating demand trends for the QuantiFERON-TB test for latent tuberculosis detection in geographies where quarantines and lockdown measures have been eased instill optimism.

On the flip side, the decline in revenues in QuantiFERON-TB test due to reduced demand in the United States and Europe is concerning. The fall in Pharma sales is also worrying.

Zacks Rank and Other Key Picks

QIAGEN currently carries a Zacks Rank #1 (Strong 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. You can see the complete list of today’s Zacks #1 Rank stocks here.

Thermo Fisher, a Zacks Rank #2 (Buy) 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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