2023-08-07 10:32:15 ET
Summary
- On August 3, 2023, Bruker Corporation, one of the leaders in the scientific instrument market, published its financial report for the second quarter of 2023.
- Bruker's revenue for the second quarter of 2023 was $681.9 million, down 0.5% from the previous quarter and up 15.9% from the second quarter of 2022.
- Bruker's R&D spending in Q2 2023 was $71 million, or 10.41% of total revenue, one of the highest in the company's history.
- We initiate our coverage of Bruker with an "outperform" rating for the next 12 months.
On August 3, 2023 , Bruker Corporation ( BRKR ), one of the leaders in the scientific instrument market, published its financial report for the second quarter of 2023. The company specializes in the design and manufacture of high-performance equipment, including for such areas as pharmaceuticals, life sciences research, and materials science research. In the second quarter, demand for Bruker products was strong, mainly due to its advanced developments using mass spectrometry technologies, atomic force microscopy, X-ray technologies, and gas and liquid chromatography.
Bruker's revenue was $681.9 million, exceeding our expectations by $19.9 million. In comparison, the company's Q2 non-GAAP EPS was $0.50 per share, $0.02 more than we expected. However, investors' reaction to Bruker's financial report was muted, mainly due to a slight decrease in margins compared to the previous year.
On the other hand, the company's management raised its guidance for 2023 from $2.83-$2.88 billion to $2.85-$2.90 billion, up about 13.6% year-on-year. Despite a sharp increase in revenue in two key segments of the company, BSI CALID and BSI Nano, since the beginning of 2023, Bruker's share price has shown a decrease of more than 4%, underperforming such major competitors in the healthcare sector as Medpace Holdings ( MEDP ) and Thermo Fisher Scientific ( TMO ).
We initiate our coverage of Bruker with an "outperform" rating for the next 12 months.
The financial position of Bruker and its prospects
Bruker's revenue for the second quarter of 2023 was $681.9 million, down 0.5% from the previous quarter and up 15.9% from the second quarter of 2022. Moreover, Bruker's actual revenue has beaten analyst consensus estimates in nine of the last ten quarters, indicating that Wall Street is underestimating its prospects in an era of rapid change in the pharmaceutical and chemical industries.
The company's total revenue rose thanks to favorable trends in each of its four segments. First, Bruker's leading position in the industry positively impacts the continued high demand for life sciences instruments based on magnetic resonance technology. In addition, BSI CALID segment revenue was $227.2 million, up 19.4% year-on-year. This growth is mainly due to increased demand for PCR assays and systems and the expansion of the mass spectrometry business, primarily due to high interest in the innovative MALDI Biotyper platform.
According to Seeking Alpha , Bruker's Q3 2023 revenue is expected to be $704.83-$739.30 million, up 10.6% from analysts' expectations for Q2 2023. At the same time, following our model, the company's total revenue will be closer to the median of this range and will amount to $725 million.
The company's revenue increases year-over-year and quarter-on-quarter will be driven by resolving supply chain issues, fulfilling backlogs, and growing sales of analytical systems for the detection of chemical and biological substances. In addition, interest rate cuts in some Latin American countries and the improvement of the macroeconomic situation in the world favorably affect the biopharmaceutical market and the increase in the number of clinical trials. Consequently, this requires pharmaceutical companies to increase investment in equipment to control synthesized pharmaceutical substances.
One of the key factors contributing to maintaining the leading position in the industry and the growth in sales of Bruker devices is the aggressive R&D policy pursued under the leadership of Frank Laukien. Through investment in R&D, the company is launching new mass spectrometry-based solutions, including the timsTOF HT mass spectrometer , which has increased scanning speed and sensitivity in the analysis of organic compounds, including proteins.
Moreover, the company's management at the Q2 2023 earnings call confirmed the continued high demand for applications in 4D proteomics.
Our timsTOF platform saw robust demand for applications in 4D proteomics, anti-proteomics and metabolomics and more. In Q2 at ASMS, we launched the timsTOF Ultra, which provides market-leading sensitivity and throughput with expanded peptide coverage and more accurate quantitation in unbiased 4D single-cell cell line and tissue proteomics.
Bruker's R&D spending in Q2 2023 was $71 million, or 10.41% of total revenue, one of the highest in the company's history. In 2023, we expect spending on developing new technologies and equipment will amount to $282 million, and in 2024 it will grow to $305 million.
Bruker's Q2 2023 operating income margin was 12.71%, down year-over-year due to the strengthening US dollar and rising investment in R&D. At the same time, we forecast that by 2023 the operating income margin of the company will remain stable and reach 16.2%, and by 2024 this value will increase to 18.5%, thanks to lower inflation and higher orders for MALDI-TOF and ESI-TOF mass spectrometers.
The company's earnings per share ((EPS)) for the second quarter of 2023 was $0.50, an increase of 11% from the previous year. According to Seeking Alpha , Bruker's Q3 EPS is expected to be $0.60-$0.72, up 30.6% from the consensus estimate for Q2 2023. While we believe this is slightly underestimated, our model puts Bruker's EPS at $0.67.
Meanwhile, Bruker's Non-GAAP P/E [TTM] of 26.07x is 36.45% higher than the sector average and 19.51% lower than the average over the past five years. On the other hand, due to net income growth in 2023, Non-GAAP P/E [TTM] will reach 25.72x, which indicates that one of the fastest-growing companies in the industry is slightly overvalued.
Conclusion
On August 3, 2023, Bruker Corporation, one of the leaders in the scientific instrument market, published its financial report for the second quarter of 2023. The company's revenue and net income continue to grow yearly, driven by demand for instruments based on technology platforms such as electrospray ionization time-of-flight spectrometry, gas chromatography-mass spectrometry, and Raman spectroscopy.
Despite an aggressive R&D policy, the company's total debt decreased by 12.3% compared to 2021 and amounted to $1.24 billion at the end of June 2023. In addition, Bruker has launched new mass spectrometry-based solutions, including the timsTOF HT mass spectrometer, which has resulted in increased scan speed and sensitivity in the analysis of organic compounds. We estimate this will lead to higher revenue growth in the BSI CALID segment due to increased orders from pharmaceutical companies and universities.
We initiate our coverage of Bruker with an "outperform" rating for the next 12 months.
For further details see:
Bruker's Q2 2023 Triumph: Dominates Scientific Instrument Market Again