Qiagen Earnings: Resetting After COVID-19 Boom Years Looks Likely to Deepen a Bit in 2023
Qiagen’s QIA second-quarter results mildly exceeded expectations, even when considering the significant COVID-19-related declines versus a tough comparable period in 2022. However, management trimmed its 2023 guidance due to more severe retrenching activities at some customers, similar to recent trends we have seen at other life science toolmakers. After adjusting our near-term assumptions a bit, we do not anticipate changing our fair value estimate for Qiagen at first glance. Also, while our moat rating remains none, we recognize that Qiagen’s operations have improved substantially in recent years even when excluding COVID-19-related demand, and we expect the company to remain economically profitable throughout our five-year forecast period.
In the quarter, Qiagen’s sales and adjusted EPS exceeded management’s previous guidance in constant currency. Qiagen delivered particularly strong results in its QuantiFERON tuberculosis diagnostic tests, which exceeded $100 million in quarterly sales for the first time. However, Qiagen’s COVID-19-related product declines overwhelmed the non-COVID-19 results, causing overall sales to decline 4% in constant currency, including a 59% decline in COVID-19-related products and a 9% increase in non-COVID-19 sales. With cost controls, however, Qiagen was able to boost adjusted EPS by 2% in constant currency to $0.52 per share, or above management’s expectations of at least $0.50.
However, with customer demand retreating further than anticipated in some segments, the company reduced its guidance for 2023 to at least $1.97 billion in constant current sales (down from $2.05 billion previously) and at least $2.07 of adjusted EPS (down from at least $2.10 previously). While disappointing, mild reductions in our near-term expectations, including cash flows as the company’s inventories build, do not look likely to materially affect our fair value estimate, which depends more on longer-term prospects that have not changed much.
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