(News Bulletin 247) – The testing specialist is sanctioned on the stock market after delivering quarterly activity that is up, but lower than expectations. Eurofins Scientific maintains its objectives for this year and for 2027.

Formerly one of the big winners on the stock market in the fight against the pandemic via its range of tests to detect Covid-19, Eurofins is still struggling to convince the market that it is able to negotiate the post-health crisis.

However, the pharmaceutical and food analysis group published an overall increase in activity at the start of the year, where in previous quarters these revenues were burdened by the reduction in Covid-19 tests. But that’s not enough for the market.

A “sluggish” start to the year

Between January and the end of March, the pharmaceutical and food analysis group announced a turnover up 5% year-on-year, to 1.653 billion euros. Eurofins Scientific specifies that this growth was “slightly slowed down” by currency effects of 1 percentage point, and by a calendar effect, since the period also included “nearly one less working day”.

This trend clearly marks an improvement compared to the first quarter of 2023. The group then reported a 10.5% decline in its revenues, weighed down by a drop in sales linked to tests and reagents for Covid-19 at least of 10 million euros, compared to more than 300 million euros a year earlier. This revenue from Covid-19 tests and reagents is now zero.

But for Stifel, Eurofins Scientific’s first quarter sales turned out to be “weak”, with revenues which came out 3% below analysts’ expectations, which were therefore placed at 1.7 billion euros. They also fell short of the expectations of Oddo BHF, which was targeting 1.717 billion euros in turnover.

Organically, growth in “core business” activities, i.e. revenue excluding clinical and reactive tests linked to Covid-19, stood at 5.5% over one year, which marks a failure compared to Visible Apha consensus posted at 6.3%, but Oddo BHF believes that the latter has not been “adjusted” for calendar effects.

Excluding these pandemic-related activities and calendar effects, Eurofins’ revenues increased by 6.8% like-for-like over one year. The group’s organic growth “exceeded Eurofins Scientific’s long-term objectives” of 6.5% per year over the 2023-2027 period, and was supported in particular by a positive trend in Europe, with growth reaching 6.8%, as well as in North America (+7.2%). Elsewhere in the world, Eurofins Scientific delivered organic growth of 8.8%, driven by dynamic activity in China, Taiwan, Australia and India.

However, Stifel notes that this organic rate “marks a deceleration of 0.3 percentage points, compared to the previous quarter”, and bluntly judges Eurofins Scientific’s first quarter to be “sluggish”.

“The good news from this publication is the accelerated resumption of mergers and acquisitions, with 7 targeted operations (bolt-on) which represent 110 million euros of acquired turnover”, appreciates Oddo BHF for its part.

Regarding the current quarter, Stifel expects the period to be marked by “a mix of positive elements (less negative impact from exchange rates, no additional negative impact from OmniGraf, in the United States ) and negative (decrease in sales linked to Covid tests)”.

“These results confirm our medium-term concerns about the group’s apparently overly ambitious objectives, which leave little room for positive surprises,” Stifel also warns in its note of the day.

Outlook renewed for 2024 and 2027

The company has renewed its 2024 outlook, first announced last February. For the current year, Eurofins Scientific still anticipates revenues of between 7.075 billion and 7.175 billion euros, an adjusted gross operating profit (Ebitda) of between 1.525 billion and 1.575 billion euros and a cash flow of from 800 million to 840 million euros.

Eurofins also confirmed its targets for 2027, i.e. revenues close to 10 billion euros, an adjusted Ebitda margin of 24% and cash flow around 1.5 billion euros.

These confirmations of objectives are relegated to the background by a market which sanctions the publication of the day. On the Paris Stock Exchange, Eurofins Scientific lost 6.4% to 58.26 euros after these quarterly sales, considered a little short, and thus posted the second largest drop in the CAC 40. Only Kering did worse (-8.2% ), the luxury group having tensed investors after sales falling sharply in the first quarter, leading it to warn about its operating profit.

Eurofins Scientific is therefore definitely upset with the publication exercise. Last February, the group had already tensed investors after generating a cash flow significantly lower than expectations in 2023 and announcing that it would cut its return to shareholders.

To date, the CAC 40 resident is now trading below 60 euros, less than half of the peak reached at more than 125 euros at the time of its induction into the stock market elite, in September 2021.