EUR 850.00 For Business Accounts Only

Morningstar | BioMerieux's Midyear Earnings Benefit From FilmArray Mix and Low Tax Rate

Although negative currency effects and the integration of Astute Medical are likely to drag down profitability in the back half of the year, BioMerieux’s operating income margin of 15.8% in the first half of the year slightly exceeded our expectations. On the basis of first-half performance, management raised its year-end revenue outlook to 9.5% organic growth with operating income of EUR 340 million-350 million, in line with our current EUR 343 million estimate. However, management’s outlook seems somewhat conservative, and we may slightly boost our fair value estimate as we raise our long-term forecast for margins, which should continue to benefit from a favorable product mix shift of higher-growth FilmArray sales. While we don’t expect to dramatically shift our long-term tax rate forecast, BioMerieux posted a lower-than-expected 19% tax rate in the quarter, benefiting from a nonrecurring U.S. pension plan contribution.

As we noted when BioMerieux published top-line results in July, the company’s growth and margin expansion potential remains largely driven by the expansion of FilmArray. BioMerieux has submitted an application with the U.S. Food and Drug Administration for a new pneumonia panel, which would expand FilmArray’s test options for care providers and could receive approval by the end of the year. FilmArray’s global expansion likely still has a long runway, with revenue outside the United States constituting only 15% of the product line’s sales. Regardless, we’re still concerned about increasing competition in the rapid-turnaround PCR diagnostic testing market, including a new product launch from Qiagen. BioMerieux will face a tough growth comparison in early 2019 thanks to the large flu-related sales boost witnessed in the early part of this year.