Abaxis (ABAX) Beats Earnings and Revenue Estimates in Q4

Abaxis, Inc. ABAX reported fourth-quarter fiscal 2018 adjusted earnings per share of 42 cents, beating the Zacks Consensus Estimate by 31.3%. Moreover, adjusted earnings rose 27.3% from the year-ago 33 cents.

Full-year 2018 adjusted earnings per share came in at $1.29 in comparison with $1.27 in fiscal 2017. The figure also surpassed the Zacks Consensus Estimate of $1.16.

Total Revenues

In the fiscal fourth quarter, Abaxis recorded revenues of $67.9 million, reflecting an increase of 16.7% from a year ago. The top line also surpassed the Zacks Consensus Estimate of $67 million. Foreign currency exchange fluctuations had a favorable 2% impact on the top line.

Fiscal 2018 revenues were $244.7 million, up 7.7% from the prior fiscal. The figure also beat the Zacks Consensus Estimate of $243.8 million.

Segments in Detail

Revenues from North America (accounting for 80% of total revenues) rose 16.7% to $54.3 million in the reported quarter. Revenues from the international markets (accounting for the rest) improved 16.2% to $13.6 million.

Abaxis,Inc. Price, Consensus and EPS Surprise

Abaxis,Inc. Price, Consensus and EPS Surprise | Abaxis,Inc. Quote

Abaxis operates through three main segments — Veterinary, Medical and Other. In the reported quarter, Veterinary sales contributed 83.4% of total sales, Medical added 15% while the remaining 1.6% was generated from Other.

Veterinary market revenues rose 19.4% year over year to $56.6 million, driven by a 22% uptick in veterinary consumable revenues to $45.3 million. Veterinary instrument revenues were up 9% year over year to $9.3 million.

Revenues from the medical market were up from $9.5 million in the same quarter last year to $10.2 million led by strength in medical rotors. Also, revenues at the North American medical division totaled $7.4 million, up 11% year over year. On a global basis, Abaxis sold 189 Piccolos in the quarter compared with 212 a year ago.

Abaxis exhibited strong consumable growth, up 19% year over year to $53.4 million in the quarter. Within the consumable product lines, total rotor revenues were $35.2 million, up 8% from $32.6 million in the year-ago quarter. On a global basis, Abaxis sold 2.77 million rotor units in the quarter under review, up 5% from 2.63 million in the year-ago quarter. Hematology reagents and rapid assays also drove growth in consumable revenues.With solid contributions from FLEX4 Rapid assay, heartworm, feline parvo and test for canine specific lipase, revenues from rapid assay were the major contributors to the top line.

Moreover, total instruments’ sales rose 8% to $10.7 million on strong uptake of the recently-launched urine sediment instrument.

Operational Updates

Gross profit in the fourth quarter rose 15.8% to $37.3 million. Gross margin contracted 40 basis points (bps) to 54.9%.

Research and development expenses increased 16.3% year over year to $5.7 million and sales and marketing expenses rose 27% to $14.6 million. General and administrative expenses also rose 4.3% to $4.8 million. However, the resultant operating income was up 8.9% to $12.2 million in the quarter and operating margin declined 130 bps to 17.9%.

Financial Update

Abaxis exited fiscal 2018 with cash, cash equivalents and short-term investments of $166.8 million, compared with $161.6 million in the fiscal third quarter.

Our Take

Abaxis exited the fiscal fourth quarter on a promising note. However, a decline in gross and operating margin raises concern. Meanwhile, a year-over-year increase in revenues buoys optimism on the company. We are upbeat about the company’s solid consumable and instrument sales growth along with strength in the medical and veterinary market segments.

Meanwhile, we are encouraged by the company’s initiation of new sales and marketing strategies. In this regard, Abaxis has received encouraging response for recently-launched products like the urine sediment analyzer and FLEX4 Rapid assay. The company plans additional launches in fiscal 2018 which are expected to drive growth.

Zacks Rank & Other Key Picks

Abaxis sports a Zacks Rank #1 (Strong Buy).

Other top-ranked stocks in the broader medical space, which reported solid earnings this season, are Laboratory Corporation of America Holdings LH, Chemed Corporation CHE and Intuitive Surgical, Inc. ISRG. While Intuitive Surgical sports a Zacks Rank #1, LabCorp and Chemed carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Intuitive Surgical reported first-quarter 2018 adjusted earnings of $2.44 per share, which beat the Zacks Consensus Estimate by 22.6%. Revenues totaled $848 million, also surpassing the Zacks Consensus Estimate by 10.6%.

LabCorp reported first-quarter 2018 adjusted EPS of $2.78, beating the Zacks Consensus Estimate by 5.3%. Revenues came in at $2.85 billion, exceeding the consensus estimate of $2.78 billion.

Chemed posted first-quarter 2018 adjusted EPS of $2.72, beating the Zacks Consensus Estimate of $2.37. Revenues came in at $439.2 million, steering past the Zacks Consensus Estimate of $420 million.

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