Bio-Rad Laboratories, Inc.’s BIO solid momentum in the QX600 Droplet Digital PCR (ddPCR) platform is poised to help it grow in the upcoming quarters. The clinical diagnostics business sees increased demand for quality control products, boosting its growth. Furthermore, the company’s emphasis on international expansion bodes well.  Yet, a soft Biopharma segment and macro-driven pressures on Bio-Rad’s margins raise worries.

In the past year, shares of this Zacks Rank #2 (Buy) company have soared 13.3% compared to the industry’s 9.3% growth. The S&P 500 composite has seen a 25.6% rise in the same time frame.

The renowned manufacturer and global supplier of clinical diagnostics and life science research products has a market capitalization of $9.57 billion. Bio-Rad’s earnings surpassed estimates in each of the trailing four quarters, with the average surprise being 30.45%.

Let’s delve deeper.

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Tailwinds for Bio-Rad

Digital PCR Business Backs Bio-Rad’s Growth: Bio-Rad’s QX600 ddPCR platform is currently robust and growing. Backed by the tremendous customer response, the company continues to ramp up production capacity to accommodate the ongoing demand. Of late, the company’s Life Science business has been maintaining a focus on biopharma, especially for digital PCR and process chromatography products and new products in development around cell biology. The company also continues to invest to enhance its leadership in digital PCR and other positions in the academic market.

In the third quarter of 2024, the ddPCR franchise grew in mid-single digits and was bolstered by additional IP-related royalties. The newly launched ddPCR assay is successfully gaining share in the oncology and cell and gene therapy markets. Considering all these factors, the company is optimistic about ddPCR’s growth in the coming quarters. Bio-Rad continues to expand the digital PCR platform’s penetration in advanced clinical diagnostic applications, both directly and through various partnerships.

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Clinical Diagnostics Continues to Gain Momentum: Within this business, the company’s diabetes franchise is seeing elevated growth and a substantial improvement in the immunohematology and quality control businesses. Bio-Rad recently launched the IH-500 next instrument, designed to enhance the functionality of the system along with increased security from potential cyberattacks. The platform’s updated software increases the competitiveness of the company’s transfusion medicine portfolio. With production ramping up in Singapore following the manufacturing transition, management has better visibility on future Diagnostics output and, therefore, backlog reduction. In third-quarter 2024, growth of the clinical diagnostics group was primarily backed by increased demand for quality control products and a favorable comparison of the immunology products.

Focus on International Markets: Bio-Rad conducts significant international operations, having direct distribution channels in more than 35 countries outside the United States. Despite soft market conditions in APAC regions for the Life Science business in the third quarter, the company remains optimistic about the continued gradual improvement into 2025. Further, the lackluster business scenario in the key European markets, primarily due to an unfavorable funding environment in Germany and in the United Kingdom, is expected to be gradually offset by a more modest improvement in funding outlooks in France and some other European countries.

Bio-Rad’s Concerns

Soft Biopharma Segment: Bio-Rad has been witnessing softness in smaller BioPharma companies, where historically, demand for life science products has been strong. This directly correlates with the funding constraints the broader pharmaceutical industry had started to experience. Management puts forth that BioPharma’s softness has resulted in the Life Science Segment’s growth at a slower pace. In the third quarter of 2024, Bio-Rad experienced reduced demand from biopharma customers for its process chromatography resins as well as from biopharma and smaller biotech customers for Life Science research products, reflecting the ongoing destocking trend across the industry. In Asia, weaker sales mainly stemmed from China’s ongoing research funding challenges. 

Economic Concerns Pressurizing Margins: Recently, Bio-Rad’s margin performance has been affected by the inflationary trend of elevated raw material costs, increased logistics costs and higher employee-related expenses. These macroeconomic factors, particularly the ongoing labor unrest, rising wages and raw material costs, along with ongoing geopolitical unrest, are leading to a significant escalation in the company’s operating expenses.

BIO’s Estimate Trends

The Zacks Consensus Estimate for Bio-Rad’s 2024 earnings per share (EPS) has increased 0.4% to $10.33 in the past 30 days.

The Zacks Consensus Estimate for the company’s 2024 revenues is pegged at $2.57 billion, which indicates a 3.7% fall from the year-ago reported number.

Other Top MedTech Stocks

Some other top-ranked stocks in the broader medical space are Veracyte VCYT, Haemonetics HAE and Phibro Animal Health PAHC.

Veracyte has estimated 2024 earnings growth rate of 137.3% compared with the industry’s 14.9%. Veracyte’s earnings surpassed the Zacks Consensus Estimate in each of the trailing four quarters, with the average surprise being 520.6%. Its shares have risen 60.8% compared to the industry’s 7.1% growth in the past year.

VCYT sports a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Haemonetics, carrying a Zacks Rank #2 at present, has an estimated fiscal 2025 earnings growth rate of 15.9% compared with the industry’s 11.9%. Shares of the company have lost 12% against the industry’s 9.3% growth. HAE’s earnings surpassed estimates in three of the trailing four quarters and missed on one occasion, with the average surprise being 2.82%.

Phibro Animal Health, carrying a Zacks Rank #2 at present, has an estimated earnings growth rate of 36.1% for fiscal 2025 compared with the industry’s 11.9%. Shares of the company have risen 84.4% compared with the industry’s 9.3% growth over the past year. PAHC’s earnings surpassed estimates in each of the trailing four quarters, with the average surprise being 25.47%.

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