Azenta shares plunge 6% on earnings miss, margin deterioration
Life sciences company maintains turnaround guidance despite gross margin declining 380 basis points
Azenta shares fell 6.3% in pre-market trading on Wednesday after the life sciences technology company missed first-quarter earnings expectations by 33%, reporting adjusted earnings per share of $0.09 against analyst estimates of $0.13.
The Burlington, Massachusetts-based company, which provides sample management and genomic services to pharmaceutical and biotechnology companies, reported gross margins of 42.9% for the fiscal first quarter ended December 31, a decline of 380 basis points from the prior year. Adjusted EBITDA margins also contracted, falling to 8.5%, a 230 basis point year-over-year reduction.
Chief Executive Officer John Marotta acknowledged the difficulties on the earnings call, noting "challenges on the gross margin line" as the company executes an ongoing turnaround initiative. The margin deterioration was driven by lower sales volumes and rework costs on several Automated Stores projects, highlighting execution issues in the company's core laboratory automation business.
Despite the quarterly setback, Azenta maintained its full-year fiscal 2026 guidance, projecting organic revenue growth of 3% to 5% and adjusted EBITDA margin expansion of approximately 300 basis points compared to fiscal 2025. The company also announced a new $250 million share repurchase program authorized through December 2028, signaling confidence in its long-term outlook.
Revenue for the quarter totaled $149 million, slightly exceeding analyst expectations of $146.9 million. However, organic sales declined 1%, reflecting broader headwinds in the life sciences market, including pricing pressures, access challenges, and a slowdown in capital spending by pharmaceutical and biotechnology customers.
Azenta is implementing its "Ascend 2026" restructuring program to streamline operations and improve efficiency. As part of these efforts, the company is divesting its B Medical Systems business for $63 million, with the transaction expected to close by March 31. The divestiture aligns with Azenta's strategy to focus on higher-margin life sciences and genomics businesses.
Analysts maintain a cautious stance on the stock. The consensus rating among Wall Street analysts is "Hold," with an average price target of $43.50, suggesting roughly 18% upside from Tuesday's closing price of $36.91. Wells Fargo, among other firms, has been monitoring the company's turnaround progress amid the challenging market environment.
The stock has been volatile over the past year, trading within a 52-week range of $23.91 to $55.63. Wednesday's pre-market decline follows a year-to-date gain of approximately 15%, as investors had initially warmed to the company's restructuring efforts and portfolio simplification strategy.
Looking ahead, investors will focus on Azenta's ability to deliver on its margin improvement targets and execute successfully on the remaining Automated Stores projects. The company's performance in subsequent quarters will be critical in validating the effectiveness of its turnaround initiatives and its capacity to navigate the persistent headwinds affecting the broader life sciences sector.