Bruker (BRKR) Q2 Earnings Meet Estimates, Margins Expand

Bruker Corporation BRKR reported adjusted earnings per share (EPS) of 25 cents in the second quarter of 2018, up 8.7% from the year-ago figure. Adjusted EPS remained in line with the Zacks Consensus Estimate.

On a reported basis, earnings came in at 20 cents a share, a 33.3% surge on a year-over-year basis.

Revenues in Detail

Bruker logged revenues of $443.7 million in the second quarter, up 6.9% year over year. Moreover, the top line surpassed the Zacks Consensus Estimate of $435 million.

Excluding a 0.7% positive effect from acquisitions and a 3.3% favorable impact from changes in foreign currency rates, Bruker reported year-over-year organic revenue growth of 2.9%.

Bruker Corporation Price, Consensus and EPS Surprise

Bruker Corporation Price, Consensus and EPS Surprise | Bruker Corporation Quote

Geographically, European revenues improved 12% year over year in the reported quarter while North America revenues inched up 0.4%. In Asia Pacific (APAC), revenue growth was 13.6%.

The company’s organic revenue growth is driven by strength in NANO, offset by an expected decline in BEST revenues.

Bruker’s BioSpin Group revenues grew 8.3% above the year-ago quarter’s level.

Revenues in the NANO group increased 13.6%, fueled by a strong uptick in industrial research markets. CALID revenues were up 11.4% year over year.

Margin Trend

As a percentage of revenues, gross margin in the quarter under review expanded 178 basis points (bps) to 46.2%. Selling, general & administrative expenses climbed 7.9% to $110.6 million. Research and development expenses rose 8.2% year over year to $43.6 million. Overall, adjusted operating margin improved 114 bps to 11.4%.

Financial Position

Bruker exited second-quarter 2018 with cash and cash equivalents plus short-term investments of $258.7 million, down from $283.9 million at the end of the first quarter. As of Jun 30, 2018, operating cash inflow was $36.1 million against $17.2 million of operating cash outflow in the year-ago period.

2018 Guidance

Bruker updated its expectations for 2018. For the full year, the company projects revenue growth of approximately 6.5% including nearly 3.5% of organic revenue rise. The figure however, compares unfavorably with the earlier prediction of 7% revenue growth comprising 3% organic increase. The company projects a year-over-year expansion of 50-80 bps in adjusted operating marginincluding an estimated 70 bps headwind from foreign currency translation.

For 2018, Bruker still anticipates adjusted EPS in the range of $1.34-$1.38, up 11-14% from the previously guided band. The Zacks Consensus Estimate of $1.38 aligns with the upper end of the company’s projection.

Our Take

Bruker exited the second quarter on a solid note with strong year-over-year increase in revenues as well as earnings. Additionally, the improvement in gross and operating margins buoys optimism. The company’s strategic acquisition activity has also been encouraging. Further, we are upbeat about the company’s current focus on product development through higher R&D. 

On the flip side, a competitive landscape and macroeconomic woes persistently pose challenges to the company.

Zacks Rank & Key Picks

Bruker carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the broader medical sector, which reported better-than-expected results this earnings season are, Intuitive Surgical ISRG, Chemed Corporation CHE and Align Technology, Inc. ALGN. While Intuitive Surgical sports a Zacks Rank #1 (Strong Buy), Chemed and Align Technology carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Intuitive Surgical delivered second-quarter 2018 adjusted EPS of $2.76, which beat the Zacks Consensus Estimate of $2.48. Revenues totaled $909.3 million, also surpassing the consensus estimate of $870 million.

Chemed reported second-quarter 2018 adjusted EPS of $2.81, which trumped the Zacks Consensus Estimate of $2.68. Revenues of $441.8 million edged past the Zacks Consensus Estimate of $432.3 million.

Align Technology posted second-quarter 2018 adjusted EPS of $1.30, steering past the Zacks Consensus Estimate of $1.09. Revenues came in at $490.3 million, beating the consensus mark of $462.9 million.

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