Qiagen (QGEN) Down 1.9% Since Last Earnings Report: Can It Rebound?

It has been about a month since the last earnings report for Qiagen (QGEN). Shares have lost about 1.9% in that time frame, outperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Qiagen due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

QIAGEN Q3 Earnings Surpass Estimates, 2021 View Up

QIAGEN N.V.’s third-quarter 2021 adjusted earnings per share were 58 cents (same at constant exchange rate or CER), unchanged year over year. Moreover, the figure surpassed the Zacks Consensus Estimate by 9.4%.

Notably, the bottom line exceeded the company’s third-quarter guidance of 52-53 cents at CER.

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

GAAP earnings per share for the quarter was 57 cents per share, improving significantly from the year-ago 7 cents.

Revenues in Detail

Net sales in the third quarter rose 10.5% on a year-over-year basis to $534.8 million (up 10% at CER). The top line exceeded the Zacks Consensus Estimate by 9.7%. Top-line growth also exceeded the company’s third-quarter net sales expectation at CER, which was anticipated to be at the same level of sales in the third quarter of 2020, approximately $483.8 million.

Sales growth was driven by a 48% CER gain in sales of the QuantiFERON-TB test and robust growth in DNA sample technologies products. Further, a stronger-than-expected uptake for COVID-19 testing solutions drove the top line.

Geographical Revenue Update

In the quarter under review, sales from the Americas (46% of sales) totaled $248 million, up 9% on a reported basis (up 9% at CER).

Revenues from Europe, Middle East and Africa (33% of sales) rose 6% reportedly (up 6% at CER) to $174 million.

Further, revenues from Asia-Pacific/ Japan (21% of sales) increased 22% year over year on a reported basis (up 20% at CER) to $112 million.

Segmental Details

As of the third quarter of 2021, QIAGEN had two major customer classes – Molecular Diagnostics and Life Sciences.

Molecular Diagnostics (representing 52% of net sales) revenues were up 18% on a reported basis (up 17% at CER) to $279 million.

Life Sciences (48% of total revenues) reported revenues of $256 million, up 4% on a reported basis (up 3% at CER).

Operational Update

Adjusted gross profit in the quarter under review rose 5.1% to $353.5 million. However, adjusted gross margin contracted 344 basis points (bps) to 66.1% due to a 23% rise in total cost of sales (adjusting for acquisition-related intangible amortization) to $181.2 million.

Sales and marketing expenses of QIAGEN rose 10.5% to $112.9 million year over year. Research and development expenses increased 33.7% year over year to $48.3 million whereas general and administrative expenses rose 8.7% year over year to $30.4 million.

Adjusted operating income (excluding items like acquisition-related intangible amortization, restructuring and integration, asset impairment) fell 4.8% year over year to $162 million in the third quarter. Adjusted operating margin, however, contracted 489 bps to 30.3%.

Financial Update

QIAGEN exited third-quarter 2021 with cash and cash equivalents, and short-term investments of $957.3 million, up from $898 million at the end of second-quarter 2021. Long-term debt was $1.57 billion in third-quarter 2021, down from $1.94 billion in the prior quarter.

Cumulative net cash flow from operating activities at the end of third-quarter 2021 was $440.5 million compared with $188.1 million a year ago.

Guidance

In November, QIAGEN updated its full-year view taking into account stronger-than-expected results for the third quarter of 2021.

Full-year net sales are now expected to grow at least 15% at CER (an increase from the earlier outlook of CER growth of 12%). Adjusted EPS for 2021 is now expected to be a minimum of $2.48 at CER (up from the prior outlook of about $2.42 at CER). The Zacks Consensus Estimate for 2021 revenues is pegged at $2.13 billion. The Zacks Consensus Estimate for adjusted earnings per share is pegged at $2.46.

Considering the Nov 1, 2021 exchange rate, currency movements against the U.S. dollar are still expected to create a positive impact of about 2 percentage points on net sales growth at actual rates for full-year 2021. Further, 2 cents of positive impact are expected on adjusted EPS.

For the fourth quarter, the company expects net sales to decline approximately 9% CER. Adjusted EPS is expected to be about 60 cents at CER compared with 68 cents in the year-ago quarter.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in estimates review.

VGM Scores

Currently, Qiagen has a poor Growth Score of F, however its Momentum Score is doing a lot better with a C. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Qiagen has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

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