Quidel beats its third quarter revenue estimate

Iit’s been a year in reverse for the testing company Quidel (NASDAQ: QDEL). Its activity went from boom at the worst of the pandemic to a significant decline, as vaccination rates increased and concerns about COVID-19 began to dissipate. Then came the delta variant and the testing warrants, and now the company is again occupied with high demand for its testing.

This month, the company released preliminary revenue figures for its upcoming third quarter. He will release full results next month and it looks like it will be another stellar quarter for the company.

Image source: Getty Images.

Quidel to Report Third Quarter Revenue of Over $ 500 Million

On October 7, Quidel announced that for the period ending September 30, its revenue would be between $ 505 million and $ 510 million. At the top of that estimate, it would be a 7% increase from the $ 476 million reported in the third quarter of last year. It’s also nearly triple the sales of $ 177 million the company posted for the previous three-month period that ended in June. The average analyst estimate for the third quarter was only $ 377 million.

The demand is so high that Quidel doesn’t think it will be able to meet all the demands, with CEO Doug Bryant noting that “employer demand has gone crazy.” This is largely due to the anticipated need for employee testing. In September, President Joe Biden announced his intention to impose weekly COVID-19 tests for unvaccinated workers at all companies with 100 or more employees.

Investors should continue to expect volatility

The danger with the healthcare company is that while sales may be up in the third quarter, what will happen in subsequent quarters can be guessed. During the company’s second quarter earnings call in August, Bryant said that “… CDC guidance and the COVID testing landscape appears to be changing on a daily basis.” And, while the mandate of stricter rules for COVID-19 testing has resulted in a sudden surge in demand for testing, investors need to be careful not to assume that it will be here to stay.

As of this writing, 66% of the U.S. population now has a dose of a COVID-19 vaccine, and 57% of people are fully vaccinated. If these percentages continue to increase, the pool of unvaccinated employees to be tested will inevitably decrease. While employers are stockpiling COVID-19 tests as of today, that might not be the case in a few months. This is what can make Quidel an incredibly volatile investment, as COVID-19 testing can play such a big role in its earnings results.

A year ago, when Quidel reported sales growth of 276% in the third quarter, COVID-19 products accounted for 79% of its revenue. In the company’s last quarter (T2), when revenue fell 12%, COVID-19’s revenue share was only 47%.

Why would I avoid Quidel

One of the main reasons I sold my Quidel shares this year was the unpredictability of COVID-19. Fluctuating income can make it difficult to assess the real situation of the business. And it also lowers the value of earnings or earnings multiples that investors often rely on to assess whether a stock is a good buy.

If you were to look at Quidel’s price / earnings (P / E) ratio and see a multiple of less than seven, you might think investors missed a golden opportunity. But, with the company having benefited from an increase in demand over the past 12 months (and which may not be replicated in the future), this is not a figure worth considering. to lean on.

Quidel’s forward P / E multiple of 15 also looks cheap, but it’s based on analyst expectations, which can vary widely. For the third quarter, analysts expected a wide range of revenue from the company, ranging from $ 179 million to $ 509 million.

Quidel’s sales are volatile, so a safer strategy would be to wait until the dust clears and COVID-19 does not represent a significant portion of its revenue (I would expect the percentage to drop below 20%), then reassess the company. Today, this is simply too moving a target, and investors would probably be better off looking for long-term investments that will bring some stability to their portfolios.

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David Jagielski has no position in the stocks mentioned. The Motley Fool owns shares and recommends Quidel. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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