On Jun 18, 2014, we issued an updated research report on Abaxis, Inc. (ABAX).
Abaxis tumbled once again in the fourth quarter of fiscal 2014 with earnings per share of 17 cents missing the Zacks Consensus Estimate by 3 cents. Earnings also slid from the year-ago number by a massive 43.3%. Revenues also fell 15.8% to $42.0 million lagging the Zacks Consensus Estimate of $46 million.
The company delivered a disappointing performance in mainstay North America although revenues from international markets improved. The Veterinary Market segment performed feebly while Medical Market showed an improvement.
Despite that, positive investor reaction led to a sharp 5.2% increase in the company’s stock price following the earnings release. We believe the upside was primarily driven by two reasons.
Firstly, investor optimism with regard to management’s conviction that the company is likely to achieve double-digit growth in fiscal 2015 may have boosted the share price. Despite the presence of several near-term challenges, the company has set goals to return to double-digit growth on both top and bottom-line fronts in 2015. With a full year of partnership with Abbott now complete, the domestic Medical Market segment looks forward to resume double-digit growth in fiscal 2015.
Additionally, Abaxis Veterinary Reference Laboratories (:AVRL) continues to be a priority, increasing sales growth and reducing loss by targeting customers who are mostly likely to benefit from the approach of splitting the sample and running the routines in-house on point-of-care equipment and from using AVRL for their specialty test needs.
Secondly, the initiation of quarterly dividend of 10 cents per share on the back of strong cash flow and expected healthy financial performance also may have led to the upside.
Abaxis has delivered negative surprises in each of the last four quarters, with an average miss of 25.12%. The stock currently carries a Zacks Rank #3 (Hold).
Other Stocks to Consider
Investors interested in the broader medical sector can consider stocks like Accuray Incorporated (ARAY), Masimo Corporation (MASI) and Natus Medical Inc. (BABY). All the three stocks carry a Zacks Rank #2 (Buy).