Why Is Haemonetics (HAE) Up 3.5% Since the Last Earnings Report?

A month has gone by since the last earnings report for Haemonetics Corporation HAE. Shares have added about 3.5% in that time frame, outperforming the market.

Will the recent positive trend continue leading up to the stock's next earnings release, or is it due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Recent Earnings

Haemonetics Corporation (HAE) reported adjusted earnings per share (EPS) of $0.43 in the third quarter of fiscal 2017, beating the Zacks Consensus Estimate by 7.5%. However, adjusted EPS declined 10% from the year-ago number.

On a reported basis, Haemonetics posted net income of $15.4 million or $0.30 per share, comparing favorably with the year-ago quarter’s net loss of $59.4 million or a loss of $1.17.

Total Revenue

Revenues declined 2% year over year (down 1% at constant exchange rate or CER) to $227.8 million in the reported quarter but managed to beat the Zacks Consensus Estimate of $219 million.

Strong performance by Haemonetics’ Plasma and Hemostasis Management franchises continued in the third quarter, offset by a persistent decline in Blood Center.

Geographically, Haemonetics witnessed 3.9% year-over-year (same at CER) revenue growth in North America to $136.7 million while its International revenue declined 10.5%.

Revenues by Product Categories

Starting fiscal 2017, Haemonetics has been reporting operating results under four business franchises: Plasma, Haemostasis Management, Cell Processing and Blood Center.

At Plasma franchise, Haemonetics reported revenues of $108.7 million (47.7% of total revenues), up 8% year over year (up 9% at CER). Plasma disposable revenues, excluding saline and sodium citrate solutions, rose 5% at CER and 8% in North America on the back of plasma collection volume strength, reflecting robust end user markets for plasma-derived bio pharmaceuticals as well as customer order timing. Outside North America, plasma collection growth was strong in Japan and weak in EMEA.

Revenues from the BloodCenter franchise declined 16% (down 14% at CER) to $76.4 million (33.5% of total revenue). Within this franchise, revenues from Platelet disposables dropped 23% (down 21% at CER) to $29.5 million while the same from Red cell disposables declined 19% (same at CER) to $7.4 million. Also, revenues from Whole blood fell 3% (down 2% at CER) to $29.2 million.

Hemostasis Management franchise revenues improved 15% (up 19% at CER) to $16.9 million (7.4% of total revenue). Within this franchise, TEG disposable revenues rose 12% (up 15% at CER) on continued growth in the U.S. and China.  Revenues from Cell Processing franchise dropped 7% (down 3% at CER) to $25.9 million (11.4% of total revenue) owing to a persistent decline in Cell Saver and OrthoPAT disposables volumes, which was partly offset by Blood Track software growth in the U.K.

Margins

Haemonetics’ third-quarter gross margin was 55.6%, a massive 228 basis-point expansion year over year, on 75% fall in cost of goods sold to $101.1 million.

Operating income was $126.7 million in the third quarter, up 1.7% from the year-ago quarter. Operating margin was up 55.6% in the reported quarter, an expansion of 228 basis points driven by operating cost reduction.

Financial Position

Haemonetics exited the third quarter with cash and cash equivalents of $129.6 million, compared to $138.8 million at the end of the second quarter of fiscal 2017. Capital expenditures totaled $60.5 million in the quarter, down from $73.8 million in the comparable year-ago quarter.

Haemonetics generated operating cash flow of $24.8 million at the end of the third quarter as against the year-ago figure of a loss of $46.8 million. At the end of the quarter under review, Haemonetics reported free cash flow (before transformation, restructuring costs and VCC capital expenditures) of $84.9 million, compared with $26.4 million a year ago.

Fiscal 2017 Guidance

The company is confident that it will achieve the upper end of previously issued revenue and earnings guidance for fiscal 2017. Management expects revenues in the band of $850–$870 million, reflecting a year-over-year decline of 4–7% on a reported basis and 2–4% at CER. The current Zacks Consensus Estimate for revenues is pegged at $873.2 million for fiscal 2017, exceeding the guided range.

In terms of the bottom line, management has maintained adjusted EPS guidance at $1.40–$1.50 for fiscal 2017. The current Zacks Consensus Estimate for adjusted EPS is pegged at $1.49, within the guided range.

Haemonetics is also encouraged by the year-to-date adjusted free cash flow of $85 million, which will allow the company to raise its annual guidance to $90–$95 million from a prior range of $65–$70 million, as a result of its focus to improve capital management and return on invested capital.

Management stated that it will provide its 2018 guidance in the month of May.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimate have trended downward during the past month. There have been four revisions lower for the current quarter.

Haemonetics Corporation Price and Consensus

 

Haemonetics Corporation Price and Consensus | Haemonetics Corporation Quote

VGM Scores

At this time, Haemonetics' stock has a nice Growth Score of 'B', though it is lagging a lot on the momentum front with an 'F'. However, the stock was allocated a grade of 'C' on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of 'C'. If you aren't focused on one strategy, this score is the one you should be interested in.

Our style scores indicate that the stock is more suitable for growth investors than value investors.

Outlook

Estimates have been broadly trending downward for the stock. The magnitude of this revision also indicates a downward shift.  Notably, the stock has a Zacks Rank #3 (Hold). We are expecting an inline return from the stock in the next few months.

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