Morningstar | BioMerieux Posts Solid 4Q and 2019 Outlook; Slightly Raising Our FVE. See Updated Analyst Note from 06 Mar 2019
We’re raising our fair value estimate for BioMerieux as the company’s 10% organic revenue growth during the fourth quarter combined with an outlook of between 7% and 8.5% growth for 2019 both surpass our expectations. An increase in marketing costs offsets a portion of the top-line performance leaving us within management’s adjusted operating income of EUR 385 to EUR 400 million of the year. Regardless, the slight increase in our revenue outlook while keeping most of our long-term margin assumptions in place puts our new fair value estimate at EUR 50 per share. While we still have some concerns about increasing competition against FilmArray, we think ongoing international expansion and the launch of new test options, including the recently approved pneumonia panel, should sustain healthy near-term growth and support the firm’s narrow economic moat.While FilmArray’s market progression sustained the molecular diagnostics segment's lead in BioMerieux’s fourth-quarter results, the company posted microbiology and industrial segment growth of 7.9% and 9.6%, respectively, that both modestly outpaced our expectations. The molecular biology segment witnessed 24.3% growth in the quarter, and we anticipate double-digit growth to continue in 2019. We estimate FilmArray is near the middle of its international expansion opportunity, with sales outside the U.S. now making up about 19% of total franchise revenue. Last, price competition in the procalcitonin market remained a headwind in BioMerieux’s immunoassay business, which saw a slight decline in sales from last year. While we still expect this segment to face competitive headwinds in 2019, we imagine price stability will improve results going forward.
Co. specializes in the field of in vitro diagnostics for clinical and industrial applications. Co. designs, develops, manufactures and markets systems used in: Clinical Applications (the diagnosis of infectious diseases such as hepatitis, HIV, tuberculosis and respiratory illnesses, as well as pathologies such as cardiovascular diseases and cancers, based on the analysis of biological samples such as blood, saliva or urine); and Industrial Applications (microbiological analysis of samples of finished or semi-finished products (or of the environment), chiefly in the food processing and biopharmaceutical industries), detecting microorganisms in agri-food, pharmaceutical and cosmetic products.
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