QIAGEN (QGEN) Meets Q3 Earnings, Lags Revenues, Keeps View

QIAGEN N.V. (NASDAQ:QGEN) reported third-quarter 2017 adjusted earnings per share of 32 cents, up 10.3% year over year. The reported figure is on par with the Zacks Consensus Estimate.

At constant exchange rate or CER, the company reported adjusted earnings per share (EPS) of 32 cents, which met the low end of the company’s guidance of 32-33 cents at CER.

QIAGEN’s reported EPS in the quarter was 21 cents, up 40% year over year.

Revenues in Detail

Net sales at actual rates in the third quarter grew 7% on a year-over-year basis to $364 million (same at CER). However, the top line missed the Zacks Consensus Estimate of $365.1 million.

Meanwhile, considering the acquisition of OmicSoft in January, revenues increased 1%. Currency translation did not have any material impact on net sales. Also, organic expansion contributed 6% of total CER growth.

Region-wise, sales from the Americas (47% of revenues) grew 3% at CER, while revenues from Europe-Middle East-Africa (32%) and Asia-Pacific/Japan (20%) increased 15% and 7%, respectively, at CER. Sales in the top seven emerging markets (17%) exhibited growth of 19% year over year at CER in the quarter under review.

Qiagen N.V. Price, Consensus and EPS Surprise

Segments in Detail

QIAGEN primarily generates revenues from Molecular Diagnostics, Applied Testing, Pharma and Academia, which represented 49%, 10%, 19% and 22% of net sales, respectively, during the reported quarter.

Molecular diagnostics sales were up 9% at CER, driven by substantial growth in QuantiFERON latent TB tests, QIAsymphony automation system consumables portfolio and solid performance of companion diagnostic pharma collaborations. Sales derived from Applied Testing rose 15% at CER, on increased uptake of new products in human ID and forensics.

Pharma sales rose 5% at CER in the third quarter and Academia sales improved 2% at CER backed by growing demand.

Operational Update

Adjusted operating income in the third quarter increased 9% year over year to $96.1 million. Also, the adjusted operating margin expanded 40 basis points to 26.4%.

Financial Update

QIAGEN exited the third quarter with cash and cash equivalents of $671.8 million, up from $542.8 million in the preceding quarter. Year-to-date net cash from operating activities was $210.7 million, down from $241.6 million a year ago. Moreover, the company reported year-to-date free cash flow of $146.1 million compared with $186.7 million in the year-ago period.

In January 2017, QIAGEN completed a synthetic share repurchase that combined a direct capital repayment with a reverse stock split as part of a commitment to return $300 million to shareholders. The transaction was announced in August 2016 and involved an approach used by various large, multinational Dutch companies to boost shareholders’ returns in a faster and more efficient manner than traditional open-market purchases. QIAGEN intended to repay the balance of the commitment through open-market share repurchases in 2017. However, QIAGEN has completed $300 million of its share repurchase goal ahead of the end of 2017 through the open-market repurchase of 1.91 million shares on the Frankfurt Stock Exchange.

2017 Guidance

QIAGEN has maintained its 2017 guidance for adjusted net sales growth at 7% (CER). Moreover, the adjusted EPS guidance has been reiterated at the band of $1.25-$1.27 at CER.

This is based on operating and financial leverage which includes benefits from the completion of the $300-million share repurchase plan and efficiency actions taken in 2016. This, however, excludes the expected 7 cents per share of restructuring costs planned for 2017. The Zacks Consensus Estimate for 2017 earnings of $1.26 is within the guided range. The Zacks Consensus Estimate for 2017 revenues is pegged at $1.42 billion.

The company also provided its financial guidance for the fourth quarter of 2017. Net sales are expected to grow 5-6% at CER. Adjusted EPS is expected at around 41-42 cents at CER on an underlying basis. The Zacks Consensus Estimate for fourth-quarter revenues is pegged at $407.65 million, while the consensus estimate for earnings stands at 42 cents.

Our Take

QIAGEN ended the third quarter on a mixed note. We are impressed with balanced growth across all of the company segments. Furthermore, on the profitability front, QIAGEN delivered strong performance with respect to operating margin. We are also upbeat about the company’s strategic focus to drive growth through Sample-to-Insight offerings. Meanwhile, its commitment to return more to shareholders through increased share repurchases reflects its solid cash position.

On the flip side, declining HPV sales in the United States continues to be a drag. Competitive landscape and strong reliance on collaborations also continue to be concerns.

Zacks Rank & Key Picks

QIAGENhas a Zacks Rank #3 (Hold).

A few better-ranked stocks in the broader medical sector are PetMed Express, Inc. (NASDAQ:PETS) , Luminex Corporation (NASDAQ:LMNX) and Intuitive Surgical, Inc. (NASDAQ:ISRG) . Notably, PetMed and Luminex sport a Zacks Rank #1 (Strong Buy), while Intuitive Surgical carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

PetMed reported earnings per share of 43 cents in the second quarter of fiscal 2018, up 79.2% from the year-ago quarter’s 24 cents. Also, gross margin expanded 548 basis points year over year to 35.2% in the reported quarter.

Luminex reported adjusted earnings per share of 19 cents in the third quarter of 2017, up 216.7% year over year. The company’s revenues in the quarter increased almost 4.1% year over year to $74.1 million.

Intuitive Surgical posted adjusted earnings of $2.77 per share in the third quarter of 2017, up 34.5% on a year-over-year basis. Also, revenues increased 18% year over year to $806.1 million.

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