Haemonetics Remains Neutral - Analyst Blog
May 31 2012 - 11:00AM
Zacks
We reiterate our Neutral
recommendation on Haemonetics (HAE) subsequent to
its fourth quarter fiscal 2012 results. The company’s revenues
during the fourth quarter surpassed the Zacks Consensus Estimate
though earnings per share lagged the forecast.
We are encouraged to note that
Plasma, which accounted for 44% of disposables revenues during the
fiscal year, is now on the path to recovery after a dismal patch.
The upsurge was largely due to the improvement in the plasma
business in Japan after declining in the first half. Besides, the
Japanese Red Cross purchased $1 million of plasma in March, one
month ahead of plan, in anticipation of a planned system
conversion. Additionally, collection volumes in the commercial
plasma business in the US were robust over the last two quarters.
The company also made commendable progress with respect to contract
extensions as 75% of this business is covered through the third
quarter of fiscal 2017 and 98% through the third quarter of fiscal
2015.
With the proposed acquisition of
the transfusion medicine business of Pall
Corporation (PLL) for $551 million, Haemonetics will be
able to enter the $1.2 billion whole blood collection market.
Manual whole blood collection accounts for the vast majority of the
nearly 60 million red blood cells collection procedures performed
annually worldwide. The asset transfer, adding 1,300 employees to
Haemonetics, will involve Pall's manufacturing facilities in
Covina, California; Tijuana, Mexico; Ascoli, Italy and a portion of
Pall's assets in Fajardo, Puerto Rico. The business generated
approximately $210 million in annual revenues spread across
Americas ($136 million), Europe ($52 million) and Asia ($22
million) and commanded 15% of global unit market share.
Haemonetics remains focused on
blood management solutions in order to provide better services to
its customers. The company’s web-based blood management portal,
IMPACT Online, has thereby witnessed greater acceptance among
customers. Revenues from Diagnostics (consisting principally of TEG
Thrombelastograph Hemostasis Analyzer) increased, driven by better
penetration of IMPACT accounts in North America and significant
growth in China. The company installed 230 TEG devices in the
second half of the fiscal year and increased the installed base by
18% in the full year. This trend is expected to continue in the
forthcoming quarters.
Despite the growing top line, the
company’s bottom line was affected by a challenging margin
scenario. Gross margin (adjusted) declined by 70 basis points (bps)
year over year to 50.8% during the quarter. Despite a 12.9% drop in
research and development expenses to $7.7 million, a 24.8% rise in
selling, general and administrative expenses to $60 million led to
a 350 bps decline in the adjusted operating margin to 14.5%.
Margins continued to remain under pressure due to the recall of
OrthoPAT devices and quality issues associated with the HS Core
disposable in Europe.
Our recommendation is backed by a
Zacks #3 Rank (“Hold”) in the short term.
HAEMONETICS CP (HAE): Free Stock Analysis Report
PALL CORP (PLL): Free Stock Analysis Report
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