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Brooks Automation Offers A Two-For-One With Exposure To 2 Healthy Growth Markets

Mar. 02, 2021 11:00 AM ETAzenta, Inc. (AZTA) Stock4 Comments
Stephen Simpson profile picture
Stephen Simpson


  • Brooks Automation is posting impressive growth, driven by healthy demand for leading-edge semiconductor production tools, bio-sample storage, genomics, and DNA/gene synthesis.
  • The semiconductor business will always be cyclical, but underlying long-term demand for leading-edge nodes looks healthy.
  • Sample storage is a reliable, cash-generating business with decent growth potential, but next-gen sequencing and DNA/gene synthesis for discovery and manufacturing is a more exciting opportunity.
  • Brooks shares are not conventionally cheap, but do not appear overpriced relative to the strong underlying growth and margin leverage opportunities.

I don’t know how much longer Brooks Automation (BRKS) will operate as is, what with the Street preferring more pure-plays these days, but for the time being this is an interesting way for investors to pursue exposure to two attractive growth markets – leading-edge semiconductor manufacturing and life sciences, with an attractive “kicker” to gene therapy in the latter.

Not surprisingly, Brooks doesn’t trade a like a value stock, and this stock is going to have more appeal to investors who care more about growth and growth stories than by-the-numbers valuation. While I do like the long-term growth potential of both businesses, I would note cyclical risk in the semiconductor business and valuation risk in life sciences given the high level of investor enthusiasm for plays in that sector.

Looking Back At The Last Quarter

Brooks Automation’s fiscal first quarter highlights some of the strong-near growth opportunities at the business, as well as the ongoing meaningful operational leverage in the business. The company not only posted its third straight meaningful earnings beat, but also parlayed a 2.5% beat on the revenue line into an 8% beat on the operating income line.

Revenue rose 19% yoy as reported and 20% in adjusted organic terms to $250M, with the Semiconductor Solutions business up 7% yoy to $131M and the Life Sciences business up 32% yoy to $118M. Within the semi business, automation sales grew 41% and advanced packaging sales rose 78%, while contamination control-related sales declined about a third. At Life Sciences, Services revenue rose 28%, including 28% growth at GENEWIZ, while product revenue grew 53%, helped by demand related to COVID-19.

Gross margin improved almost five points from the prior year (to 46.3%), with Semiconductor margin up more than three points (to 42.8%) and Life Sciences up almost six points to 50.2%, with Services margin improving

This article was written by

Stephen Simpson profile picture
Stephen Simpson is a freelance financial writer and investor.Spent close to 15 years on the Street (sell-side, buy-side, equities, bonds).

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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Comments (4)

Mostly Small Caps profile picture
@Stephen Simpson - 3 Years. That's my guess as to how long it will be before BRKS decides to split the company in two parts. Originally there was technical synergy logic for the Life Sciences / Semi combination but following the sale of the cryogenics business to Atlas Copco, the technical synergies, as I understand it, became less relevant. I believe that the Company is not just waiting until both sides of the house are adequately sized and then we shall see the house divided. It will be interesting at that point to see if Brooks pursues some other avenue of diversification for the Semi side. Alternatively, that part could be sold to MKS Instruments or another industry player.

Thanks for the article on one of my main holdings
Stephen Simpson profile picture
@Mostly Small Caps I think that's a very credible timeline.
@Mostly Small Caps they just announced the split up, what do you think now?

This has been on my watchlist for a while and I’m tempted to pull the trigger because spinoffs usually perform well
Mostly Small Caps profile picture
@GwailoHK - Yep, the split will take place sooner than I had expected. The stock price already reflects a decent amount of future growth. This is appropriate as markets being served should be favorable and the two companies will be well positioned for continued success. I will likely continue to hold shares in both of the future companies but if I were to choose one (assuming they start with similar market caps), I would bet on the New Life Sciences Company given that it will be led by Steve Schwartz and Lindon Robertson (Brooks' current CEO and CFO). Not only do I have a lot of confidence in their abilities but I suspect that they had a choice of which company to go with and are in the best position to evaluate which future co. has the greatest potential.

Here's a link to Brooks' most recent presentations ... brooks.investorroom.com/...
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