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Morningstar | Qiagen’s Improving Product Portfolio Should Accelerate Growth in 2019

Although Qiagen’s 5% constant currency revenue growth during the fourth quarter and outlook for between 7% to 8% constant currency growth in 2019 are both modestly below our expectations, we don’t envision any material shift in our fair value estimate or no-moat rating for the company. Most of the quarter’s revenue shortfall stemmed from a pullback in low-margin service contracts as management seeks to bolster capacity for its broadening portfolio, and the changes had a minimal effect on the bottom line. As a result, Qiagen’s $1.34 in adjusted EPS for 2018 as well as guidance for between $1.45 to $1.47 in constant-currency adjusted EPS for 2019 both fall near our estimates.

Despite the slightly weaker revenue outlook for 2019 and the ongoing U.S. HPV headwind, Qiagen’s progress expanding its product portfolio adds compelling growth drivers on the horizon. While Qiagen’s molecular diagnostics segment reported 5% constant currency growth for the quarter, growth was 9% when excluding negative effects from U.S. HPV and service contract sales. We still expect accelerating growth in the molecular division thanks to new products, including the ongoing genome sequencer GeneReader launch, the U.S. launch of the QIAstat-Dx PCR system in 2019, roll out of the integrated PCR NeuMoDx line, and likely launch of a new digital PCR system in 2020. Combined with its companion diagnostics portfolio, these new products should all bolster Qiagen’s standing in the more attractive growth areas of the diagnostics market. As we’ve noted in the past, however, we still have concerns about questionable product differentiation, late entry into some of these markets, and existing formidable competition that may limit the company’s ability to gain market share.