Mixed Sentiment Persists Amid Uncertainty in QuidelOrtho's Core Profitability: Analyst

QuidelOrtho Corporation QDEL released preliminary Q3 revenue of $738 million to $744 million, primarily driven by higher respiratory product sales, particularly SARS and flu.

The company says earlier-than-expected demand for respiratory products in core markets drives strong preliminary performance.

The company sees non-respiratory product revenue of $557 million-$560 million and respiratory product revenue of $181 million-$184 million.

William Blair says respiratory product revenue is well above their estimate of $101 million. 

The upside here comes as little surprise given management's intra-quarter bullish tone on respiratory (COVID) testing demand from retail and point-of-care settings; however, the magnitude of the beat is surprising. 

On the non-respiratory side, sales grew approximately 2% Y/Y (reported) to $559 million at the midpoint, missing William Blair's estimate and consensus by just over $10 million. 

While commentary in the press release noted that this met the team's internal expectations—including for China— the analyst writes that investors will be focused on drivers of the non-respiratory segment in the quarter as this is more likely to drive long-term value in the stock.

Due to the ongoing uncertainty surrounding the core profitability outlook, China-related risks, and the Savanna pipeline, sentiment may continue to display a degree of mixed sentiment. 

However, William Blair writes that the current share valuation presents an entry opportunity. 

This valuation doesn't adequately account for the growth potential, free cash flow, and a notably diversified business portfolio compared to the historical norm. 

William Blair reaffirms an Outperform for the stock.

Price Action: QDEL shares are down 4.69% at $65.96 on the last check Thursday.