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Qiagen (QGEN) Q1 Earnings Top Estimates, Operating Margin Down

QIAGEN N.V.’s QGEN first-quarter 2023 adjusted earnings per share (EPS) were 51 cents (52 cents at a constant exchange rate or CER), down 36.3% year over year. However, the figure surpassed the Zacks Consensus Estimate by 8.5%.

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

The GAAP EPS for the quarter was 37 cents, down 45% year over year.

Revenues in Detail

Net sales in the first quarter fell 22.8% year over year to $485.4 million (down 20% year over year at CER). The top line missed the Zacks Consensus Estimate by 0.1%. Sales at CER were $502 million, well ahead of the outlook of approximately $490 million.

First-quarter sales were driven by 12% CER growth in the non-COVID-19 portfolio to $434 million. However, sales of COVID-19 products declined 76% at CER to $52 million amid significantly reduced demand compared to the year-ago period.

Geographical Revenue Update

In the quarter under review, sales from the Americas (51% of sales) totaled $247 million, down 2.4% year over year (down 2% at CER).

Revenues from Europe, the Middle East and Africa (32% of sales) fell 37.8% reportedly (down 34% at CER) to $155 million.

Further, revenues from Asia-Pacific/Japan (17% of sales) fell 34.1% year over year on a reported basis (down 29% at CER) to $83 million.

QIAGEN N.V. Price, Consensus and EPS Surprise

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

Segmental Details

As of the first quarter of 2023, QIAGEN had two major customer classes — Molecular Diagnostics and Life Sciences.

Molecular Diagnostics (representing 51.5% of net sales) revenues were down 30% on a reported basis (down 27% at CER) to $250 million.

Life Sciences (48.5% of total revenues) reported revenues of $235 million, down 14% on a reported basis (down 11% at CER).

Operational Update

The adjusted gross profit (excluding the amortization of acquisition-related intangibles) in the quarter under review fell 24.8% to $323.5 million.

Meanwhile, the adjusted gross margin contracted 183 basis points (bps) to 66.6% despite an 18.3% decline in the cost of sales (excluding amortization) to $162 million.

Sales and marketing expenses of QIAGEN fell 3.3% year over year to $115 million. Research and development expenses rose 18% year over year to $54.7 million, whereas G&A expenses fell 4.1% year over year to $33 million.

The adjusted operating income (excluding items like acquisition-related intangible amortization, restructuring and integration and others) declined 47.5% year over year to $121.2 million in the first quarter. Meanwhile, the adjusted operating margin contracted 1180 bps to 25%.

Financial Update

QIAGEN exited the first quarter of 2023 with cash and cash equivalents and short-term investments of $1.29 billion, down from $1.42 billion at the end of 2022. The long-term debt was $1.49 billion at the end of the first quarter of 2023 compared with $1.47 at the end of 2022.

The cumulative net cash inflow from operating activities at the end of the first quarter was $71.9 million compared with $207.4 million in the year-ago period.

In January 2023, QIAGEN completed the acquisition of privately held biotech company, Verogen, in a $150 million cash transaction. The buyout strengthens QIAGEN’s leadership in the fast-growing field of Human ID/forensics, anchored by sample collection and preparation, genetic testing analysis and workflow automation.

Guidance

QIAGEN reaffirmed its outlook for 2023, which it originally announced during the 2022 fourth-quarter earnings call.

Full-year net sales are expected to be nearly $2.05 billion at CER (unchanged from the previous outlook). The Zacks Consensus Estimate for 2023 revenues is pegged at $2.05 billion.

The adjusted EPS for 2023 is expected at about $2.10 at CER (unchanged). The Zacks Consensus Estimate for adjusted EPS is pegged at $2.10.

For the second quarter of 2023, the company expects net sales of at least $490 million at CER. The Zacks Consensus Estimate for the same is pegged at $499.9 million.

The adjusted EPS is expected to be at least 50 cents at CER. The Zacks Consensus Estimate for the adjusted EPS is also pegged at 50 cents.

Our Take

QIAGEN ended the first quarter of 2023 with better-than-expected earnings, while revenues were almost in line with estimates. High organic revenues driven by strength in the non-Covid-19 portfolio, buoy optimism. QGEN continues to invest in key portfolio areas, including QIAcuity digital PCR, the syndromic system QIAstat-Dx and the integrated PCR testing system NeuMoDx.

QGEN’s reaffirmed 2023 guidance considers double-digit CER growth in non-COVID-19 product groups, offset by a significant decline in COVID-19 product group sales. The outlook also reflects the increased sales expectation (approximately $20 million of sales) from the Verogen acquisition, building on nearly $5 million of sales from the earlier distribution agreement.

However, the year-over-year decrease in the top and bottom lines raises apprehension. A contraction in the adjusted operating margin is an added concern. Higher R&D costs in the quarter represented 11.3% of sales made toward investments in the Five Pillars of Growth for new products, test menus and applications.

Zacks Rank & Key Picks

QIAGEN currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader medical space that have announced quarterly results are Edwards Lifesciences Corporation EW, Intuitive Surgical, Inc. ISRG and Johnson & Johnson JNJ.

Edwards Lifesciences, carrying a Zacks Rank #2 (Buy), reported a first-quarter 2023 adjusted EPS of 62 cents, beating the Zacks Consensus Estimate by 1.6%. Revenues of $1.46 billion outpaced the consensus mark by 4.7%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Edwards Lifesciences has a long-term estimated growth rate of 6.8%. EW’s earnings surpassed estimates in two of the trailing four quarters, missed the same in one and broke even in the other, the average being 1.2%.

Intuitive Surgical, having a Zacks Rank #2, reported a first-quarter 2023 adjusted EPS of $1.23, which beat the Zacks Consensus Estimate by 3.4%. Revenues of $1.70 billion outpaced the consensus mark by 6.9%.

Intuitive Surgical has a long-term estimated growth rate of 13%. ISRG’s earnings surpassed estimates in two of the trailing four quarters and missed the same in the other two, the average being 1.9%.

Johnson & Johnson reported first-quarter 2023 adjusted earnings of $2.68 per share, beating the Zacks Consensus Estimate by 6.8%. Revenues of $24.75 billion surpassed the Zacks Consensus Estimate by 5%. It currently carries a Zacks Rank #2.

Johnson & Johnson has a long-term estimated growth rate of 5.5%. JNJ’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 3.9%.

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QIAGEN N.V. (QGEN) : Free Stock Analysis Report

Johnson & Johnson (JNJ) : Free Stock Analysis Report

Intuitive Surgical, Inc. (ISRG) : Free Stock Analysis Report

Edwards Lifesciences Corporation (EW) : Free Stock Analysis Report

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