BIO: Expanded Diagnostics Partnership Will Drive Margin Improvements Amid Mixed Revenue Outlook

Key Takeaways

• Expansion in advanced molecular diagnostics and robust process chromatography growth are enhancing Bio-Rad's market position, revenue prospects, and operating leverage.
  
• Increased focus on consumables, lean operations, and geographic diversification is driving higher-margin recurring revenues and stability despite external cost and funding pressures.
  
• Weak instrument demand, policy changes, cost pressures, and reliance on public funding expose Bio-Rad to prolonged margin compression, revenue risk, and competitive threats.

Catalysts

Manufactures and distributes life science research and clinical diagnostic products in the United States, Europe, Asia, Canada, and Latin America.

• Recent launch and expansion of the QX Continuum and QX700 Series ddPCR platforms, alongside the acquisition of Stilla Technologies, positions Bio-Rad to accelerate its share capture as demand grows for advanced molecular diagnostics and precision medicine tools; this is expected to drive ddPCR revenue growth and improve margins through higher consumable pull-through and broader assay adoption.
  
• Robust order growth and increased guidance in Bio-Rad's process chromatography business reflect the ongoing global investment in biopharmaceutical research and manufacturing, a trend likely to fuel sustainable double-digit revenue increases and improved operating leverage as new biologics and therapeutics expand the market.
  
• Resilience and stable growth in consumables and reagents-demonstrated by high single-digit growth, especially in the face of delayed academic and instrument funding-are shifting Bio-Rad's sales mix toward higher-margin, recurring revenues, supporting overall profitability and cash flow stability.
  
• Strategic operational actions, including lean initiatives, flexible supply chain management, and geographic diversification, have enabled Bio-Rad to offset tariff and reimbursement headwinds while benefiting from reduced regulatory trade risks, supporting improved operating margins and mitigating cost volatility.
  
• Strong fundamentals in global quality control and specialty diagnostics, underpinned by demographic shifts such as an aging population and growing demand for validated diagnostic solutions, are likely to steadily support future top-line revenue growth and help buffer earnings against cyclical or regional funding pressures.

Bio-Rad Laboratories Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Bio-Rad Laboratories's revenue will grow by 2.3% annually over the next 3 years.
• Analysts assume that profit margins will shrink from 12.5% today to 8.5% in 3 years time.
• Analysts expect earnings to reach $232.0 million (and earnings per share of $8.29) by about September 2028, down from $319.2 million today.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 42.6x on those 2028 earnings, up from 24.4x today. This future PE is greater than the current PE for the US Life Sciences industry at 29.1x.
• Analysts expect the number of shares outstanding to decline by 3.34% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.5%, as per the Simply Wall St company report.

Bio-Rad Laboratories Future Earnings Per Share Growth

Risks

• Persistent softness in instrument demand, particularly in the biotech and global academic research markets, is creating headwinds for revenue growth and leading to lower manufacturing absorption, as evidenced by the year-over-year declines and management commentary; if this trend continues, it may stagnate revenue and put downward pressure on gross and operating margins over the long term.
  
• Pressure on Clinical Diagnostics, especially in China, from reduced reimbursement for diabetes testing, soft economic conditions, and recent diagnosis-related group (DRG) policy changes, creates ongoing risk of revenue contraction and market share erosion, particularly as healthcare policy and reimbursement structures remain volatile in key international markets.
  
• Gross margin contraction, declining from 55.6% to 53% year-over-year due to higher material costs and underutilized manufacturing assets (from weak instrument sales), signals that Bio-Rad could face ongoing margin compression if input costs remain elevated or if demand for high-margin products does not recover.
  
• Long-term reliance on academic and government research funding as a customer base leaves Bio-Rad exposed to global public funding volatility, with European and U.S. budgets under pressure or being diverted to other priorities, risking both recurring revenue from consumables and future instrument sales stability.
  
• Intensifying competition and rapid technological change in the life sciences and diagnostics sectors, including growing pressure from large conglomerates and agile start-ups, raises the risk that Bio-Rad's product portfolio-particularly as parts of it age-may become less differentiated or obsolete, potentially resulting in market share losses and constraining future earnings growth.

Valuation

• The analysts have a consensus price target of $331.167 for Bio-Rad Laboratories based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $437.0, and the most bearish reporting a price target of just $265.0.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $2.7 billion, earnings will come to $232.0 million, and it would be trading on a PE ratio of 42.6x, assuming you use a discount rate of 7.5%.
• Given the current share price of $288.05, the analyst price target of $331.17 is 13.0% higher. Despite analysts expecting the underlying buisness to decline, they seem to believe it's more valuable than what the market thinks.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.