QIAGEN (QGEN) Q2 Earnings Top Estimates, Margins Decline

QIAGEN N.V.’s QGEN second-quarter 2022 adjusted earnings per share (EPS) were 51 cents (53 cents at constant exchange rate or CER), down 23.9% year over year. The figure surpassed the Zacks Consensus Estimate by 13.3%.

The bottom line exceeded the company’s second-quarter guidance of at least 46 cents at CER.

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

GAAP EPS for the quarter was 42 cents per share, down 19.2% year over year.

Revenues in Detail

Net sales in the second quarter fell 9.1% on a year-over-year basis to $515.5 million (down 4% at CER). The top line exceeded the Zacks Consensus Estimate by 3.5%. Sales at CER were $544 million, also exceeding the company’s second-quarter expectation of $510 million at CER.

The second-quarter sales were driven by 10% growth at CER in the non-COVID product portfolio. However, sales of COVID-19 products plunged 39% at CER.

Geographical Revenue Update

In the quarter under review, sales from the Americas (49% of sales) totaled $252 million, down 2% on a reported basis (down 1% at CER).

Revenues from Europe, the Middle East and Africa (31% of sales) fell 21% reportedly (down 10% at CER) to $161 million.

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

Further, revenues from Asia-Pacific/ Japan (20% of sales) fell 6% year over year on a reported basis (0% at CER) to $102 million.

Segmental Details

As of the second quarter of 2022, QIAGEN had two major customer classes – Molecular Diagnostics and Life Sciences.

Molecular Diagnostics (representing 49% of net sales) revenues were down 6% on a reported basis (0% at CER) to $255 million.

Life Sciences (51% of total revenues) reported revenues of $261 million, down 12% on a reported basis (down 8% at CER).

Operational Update

Adjusted gross profit in the quarter under review fell 10.5% to $346.1 million. Meanwhile, the adjusted gross margin contracted 106 basis points (bps) to 67.1% due to a 6.1% rise in the total cost of sales (adjusting for acquisition-related intangible amortization) to $169.4 million.

Sales and marketing expenses of QIAGEN rose 7.7% to $118.9 million year over year. Research and development expenses contracted 4.3% year over year to $49.9 million, whereas general and administrative expenses rose 4.9% year over year to $32.5 million.

Adjusted operating income (excluding items like acquisition-related intangible amortization, restructuring and integration and asset impairment) declined 25.1% year over year to $144.8 million in the second quarter. Meanwhile, the adjusted operating margin contracted 599 bps to 28.1%.

Financial Update

QIAGEN exited second-quarter 2022 with cash and cash equivalents and short-term investments of $1.31 billion, up from $1.23 billion at the end of first-quarter 2022. Long-term debt was $1.48 billion in second-quarter 2022, slightly up from $1.47 billion at the end of the first quarter.

Cumulative net cash flow from operating activities at the end of second-quarter 2022 was $379.4 million compared with $285 million in the year-ago period.

Guidance

QIAGEN updated its outlook for full-year 2022, reaffirming its previous goal of double-digit CER sales growth from the non-COVID product groups while assuming a significant year-on-year decline in the COVID-19 sales based on the anticipated volatile pandemic trends this year. The updated outlook also considers the current inflation and other macroeconomic issues.

Full-year net sales are expected to be at least $2.2 billion at CER (up from the previously projected $2.12 billion). The Zacks Consensus Estimate for the metric is pegged at $2.08 billion.

Adjusted EPS for 2022 is expected to be at least $2.30 at CER (up from the prior projection of $2.14). The Zacks Consensus Estimate for adjusted EPS is pegged at $2.09.

For the third quarter, the company expects net sales to grow at least $510 million at CER compared with $535 million in the year-ago quarter. The Zacks Consensus Estimate for the same is pegged at $468.4 million.

Adjusted EPS is expected to be at least 48 cents at CER compared with 58 cents in the year-ago quarter. The Zacks Consensus Estimate for adjusted EPS is pegged at 42 cents.

Our Take

QIAGEN ended second-quarter 2022 with better-than-expected earnings and revenues. The improved sales growth in the non-COVID-19 product portfolio contributed to the top line results. An increase in short-term cash level looks promising. Further, the raised full-year 2022 guidance for net sales and EPS indicates this growth momentum to continue.

However, the substantial year-over-year decline in revenues and earnings does not bode well. The lowered sales across the company’s operating segments are discouraging. Contraction of both margins is worrisome as well. A series of current macroeconomic issues, including supply chain disruptions, energy needs and rising inflation, continue to hamper the company’s performance.

Zacks Rank and 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 Quest Diagnostics Incorporated DGX, Medpace Holdings, Inc. MEDP and Neogen Corporation NEOG.

Quest Diagnostics, carrying a Zacks Rank #2 (Buy), reported second-quarter 2022 adjusted EPS of $2.36, which beat the Zacks Consensus Estimate by 9.8%. Revenues of $2.45 billion outpaced the consensus mark by 7.5%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Quest Diagnostics has an earnings yield of 7.2% compared with the industry’s 3.3%. DGX’s earnings surpassed estimates in three of the trailing four quarters and missed the same in one, the average being 12.1%.

Medpace Holdings, having a Zacks Rank #2, reported second-quarter 2022 adjusted EPS of $1.46, which beat the Zacks Consensus Estimate by 8.9%. Revenues of $351.2 million outpaced the consensus mark by 1.3%.

Medpace Holdings has an estimated growth rate of 22.7% for full-year 2022. MEDP’s earnings surpassed estimates in the trailing four quarters, the average being 17.3%.

Neogen reported fourth-quarter fiscal 2022 adjusted EPS of 18 cents, which surpassed the Zacks Consensus Estimate by 12.5%. Fiscal fourth-quarter revenues of $140.1 million outpaced the Zacks Consensus Estimate by 1.3%. It currently has a Zacks Rank #2.

Neogen has an estimated growth rate of 1.6% for fiscal 2023. NEOG’s earnings surpassed estimates in two of the trailing four quarters, lagged the same in one and broke even in the other, the average surprise being 1.5%.

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