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ISI Group Downgrades Bruker to Neutral

NEW YORK (GenomeWeb) – Saying a recent uptick in Bruker's share price represents a less favorable risk/reward profile, investment bank ISI Group today downgraded the company's stock to a Neutral rating.

Analyst Ross Muken lowered Bruker from a previous Buy rating but raised the price target on the firm's shares to $25.50 from $24.50.

In a research note, Muken noted that Bruker's stock has outperformed its peers in the life science tools and diagnostics space year to date and said that his general view of the company remains unchanged, as he remains confident that growth will come from key drivers such as the adoption of the MALDI Biotyper. However, he also pointed out that Bruker's shares are now trading at 3-5x premium to peers, representing a less favorable risk-to-reward profile.

Since the start of June, Bruker's stock has climbed about 14 percent.

As the company further restructures its Chemical and Applied Markets division — an effort that includes narrowing its strategic focus, reducing operating expenses, closing some sites, and outsourcing some operations — "we believe investors have baked in a positive outcome to the downsizing" of CAM, "limiting future upside catalysts outside of a macro acceleration," Muken said.

He also noted an economic index called the Purchasing Managers Index, as well as ISI survey data, that paint a mixed picture for instrument demand. "Bottom line, we are slightly more cautious on core growth for the tools group … than the consensus in 2H'14," particularly for more expensive instrument purchases, Muken said.

He cautioned that the ratings change should not be taken as a sign of caution about Bruker's near-term fundamentals, "as we have no insight as to how the company will perform in" Q2.

Muken's downgrade follows an upgrade to Bruker's stock less than three weeks ago by Wells Fargo on the CAM restructuring and Bruker's plans to expand its presence in the clinical market.

In afternoon trading on Tuesday, shares of Bruker on the Nasdaq were down 3 percent at $23.29.

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