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Who's Watching Bio-Rad Laboratories in 2017?

PART:
1 2 3 4
Part 3
Who's Watching Bio-Rad Laboratories in 2017? PART 3 OF 4

Inside Bio-Rad Laboratories’ Profit Margin Expectations in 2017

Profit margins in 2017

On March 13, 2017, Bio-Rad Laboratories (BIO) announced that it expects to reach an EBITDA (earnings before interest, tax, depreciation, and amortization) margin of around 20% by 2020. The company has also projected its currency-neutral GAAP (generally accepted accounting principles) operating margins to be around 7% in 2017.

Inside Bio-Rad Laboratories&#8217; Profit Margin Expectations in 2017

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For fiscal 2017, Wall Street analysts have projected Bio-Rad’s net profit margin to be around 4.0%, which would represent a YoY (year-over-year) growth of ~260 basis points.

In 2017, peers PerkinElmer (PKI), Danaher (DHR), and Thermo Fisher Scientific (TMO) are expected to report net profit margins of ~11.6%, ~12.6%, and ~12.0%, respectively.

SG&A trends in 1Q17

In 1Q17, Bio-Rad’s net income was $12.4 million, which is similar to what it was in 1Q16. While the company witnessed an increase in revenues in 1Q17, these revenues were partly offset by rising internal investments.

In 1Q17, Bio-Rad’s SG&A (selling, general, and administrative) expenses rose by around $6.0 million to $8.0 million, due to the deployment of a new SAP (systems applications products) operating model in Europe. While these initiatives were profitable in 1Q17, they are expected to improve the supply chain in Europe and introduce share services for back office activities in Europe.

Despite these increased expenses, in 1Q17, Bio-Rad’s SG&A expenses of around $194.9 million was 39% of the company’s quarterly revenues, as compared to around 40% in 1Q16.

R&D trends

Bio-Rad Laboratories also witnessed a rise in R&D (research and development) expenses, from $48.6 million in 1Q16 to $49.5 million in 1Q17. This rise in expenses was related to investments made for the development of new applications in Droplet Digital PCR (polymerase chain reaction) technology.

The company also witnessed a high effective tax rate of around 38% in 1Q17. This was attributed to higher losses in certain smaller international markets, which may not result in any accrued benefit. Based on this tax performance, the company has updated its effective tax rate guidance for 2017 from the range of 30%–32% to the new range of 31%–33%.

Notably, the Vanguard Total Stock Market ETF (VTI) has about 0.02% of its total portfolio holdings in Bio-Rad Laboratories.

In the next and final part of this series, we’ll discuss the growth prospects Bio-Rad’s Life Science segment.

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