Bruker Corporation BRKR reported adjusted earnings per share (EPS) of 19 cents in the second quarter of 2015, down 9.5% year over year. Adjusted EPS, however, steered ahead of the Zacks Consensus Estimate by a couple of cents. Severe foreign exchange headwind, leading to a year-over-year decline in revenues, was primarily responsible for the company’s staggering bottom line in the second quarter.
Without one-time adjustments, Bruker reported net income of $21.9 million or 13 cents per share reflecting a year-over-year increase of 33.5% or 30% respectively in the second quarter.
Revenues in Detail
Bruker reported revenues of $396 million in the second quarter, down 13.4% year over year but higher than the Zacks Consensus Estimate of $390 million. While divestitures negatively affected Bruker's first quarter revenues by 2.6%, foreign exchange rates dragged the same by 11.5%. Excluding these impacts, Bruker's organic revenues increased 0.7% on a year-over-year basis.
Margin Trends
Gross profit decreased 15.5% to $169 million in the reported quarter. Accordingly, gross margin contracted 106 basis points (bps) to 42.8% from the year-ago quarter.
While selling, general & administrative expenses declined 14.3% to $98.5 million, research and development expenses fell 15.7% to $37.5 million. Yet, adjusted operating income declined 18.5% year over year to $33.4 million. Consequently, adjusted operating margin also contracted 53 bps to 8.4% in the quarter.
Financial Position
Bruker exited the reported quarter with cash and cash equivalents of $334.5 million, reflecting an improvement from $334.5 million at the end of the first quarter of 2015. In the second quarter, net cash outflow from operating activities was $1.5 million, compared to net cash flow of $27 million in the first quarter.
Guidance
For full year 2015, Bruker continues to project organic revenue increase of approximately 1% while adjusted EPS is still expected to remain flat on a year-over-year basis. The Zacks Consensus Estimate of revenues for 2015 is pegged at $1.601 billion while the same for adjusted EPS stands at 75 cents.
Management also continues to expect its adjusted operating margin to expand by 100 bps on a year-over-year basis in the current year.
Our Take
We remain on the sidelines with regard to Bruker's second-quarter 2015 financial results, wherein although earnings and revenues comfortably beat the Zacks Consensus Estimate, the year-over-year numbers failed to show any improvement.
Amid an unfavorable currency scenario, with no improvement expected in the near term, we are banking on the implementation of the company’s Biospin restructuring plan in the second half of 2015, which is expected to contribute to margin improvements by the second quarter of 2016. Notably, the company witnessed revenue declines in Biospin and Best segments with organic revenue growth in Calid and Nano groups.
Despite market weakness and currency headwinds upsetting Bruker's financial performance, management's current focus lies on expanding its operational initiatives in 2015. Special emphasis is on optimizing the cost structure and the manufacturing footprint within the Bruker BioSpin Group. Such efforts lend optimism over the short term.
Zacks Rank
Bruker currently has a Zacks Rank #2 (Buy). Some other medical stocks worth considering over the short term are Abaxis, Inc. ABAX, Hospira Inc. HSP and NuVasive, Inc. NUVA. All the three stocks sport a Zacks Rank #1 (Strong Buy).
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