Haemonetics Beats Earnings, Revs Down
Haemonetics Corporation (HAE) reported adjusted earnings per share (EPS) of 66 cents in the second quarter of fiscal 2014, a growth of 24% from the year-ago quarter and ahead of the Zacks Consensus Estimate of 56 cents.
On a reported basis Haemonetics’ earnings per share was 32 cents, a major improvement from the year-ago quarter of 13 cents.
Revenue in Details
Total revenues during the reported quarter were $235.7 million, up 8.1% from $218.2 million recorded a year-ago quarter.
Excluding recently-acquired whole blood business, organic revenue declined 1% year over year and increased 2% on a constant currency basis.
Total Revenue, however, missed the Zacks Consensus Estimate of $240 million.
Segments in Detail
Haemonetics has three product categories namely Disposables, Equipment and Software solutions.
Total Disposables comprising of Plasma Disposables, Blood center disposables and Hospital Disposables reported revenues of $203.7 million, up 9.6% from the year ago quarter. Russia, China and other emerging markets were the major revenue drivers, fueled by growth in North America.
Software Solutions revenue were $17.1 million for the quarter, down $0.9 million or 5.1% year over year.
Equipment and Other Revenue were $14.9 million for the quarter, improving $0.6 million or 4% year over year. Particular strength was noticed in TEG equipment sales in North America, Russia and China.
Geographic
During the quarter, Haemonetics experienced organic revenue growth of 4% in North America and 26% in Asia Pacific. Strength in the Plasma business drove growth in North America. Sales improvement in the Asia Pacific region was attributable to the shift to a direct business model in Australia and New Zealand, complemented by robust growth in China and other emerging markets.
On the other hand, a 9% decline in Europe accounted from the aggressive return of a surgical competitor in the market. The 16% fall in Japan was mainly owing to the weakness of the Yen exchange rate.
Operational Updates
The fiscal second-quarter gross profit was $123.4 million, up 11% year over year. Adjusted gross margin was 52.3%, a healthy expansion of 120 basis points (bps) from the year-ago quarter. The surge in the gross margin can be attributed to significant improvement in the base business, driven by productivity programs yielding cost efficiencies, partially offset by unfavorable revenue mix of lower-margin whole blood and plasma disposables.
Adjusted operating expenses were $74 million in the reported quarter, up $2.5 million or 4% year over year. Adjusted operating margin was 20.8%, marking a rise of 260 basis points.
Financial Updates
The company ended the second quarter of fiscal 2014 with $159.1 million of cash and cash equivalent and long term debt of $420 million.
During the reported quarter, the company generated $49 million in free cash flow (before integration and transformation costs).
Outlook
Haemonetics provided an update to its fiscal 2014 outlook. The company expects organic revenues to grow 2-4% in constant currency and 0-2% on year on year basis, including the impact of Yen weakness. Whole blood revenues are expected to be around $190 million for fiscal 2014. Total revenue growth is expected to vary in the range of 5-7% for the full year.
Adjusted gross margin is expected to remain at 52% while adjusted operating income is estimated to be within $175 million to $180 million in fiscal 2014, inducing an operating margin of 19%.
The company reaffirms its previous adjusted EPS in the range of $2.30-$2.40, excluding 0.37 cents of deal amortization.
Our Take
The company delivered an impressive growth during the quarter. All its products are steadily gaining momentum. With a strong cash balance and potential opportunities evolving from emerging markets, the company has excellent growth prospects.
Moreover, the successful integration of the SOLX collection with the recent acquisition of Hemerus Medical, is expected to garner greater revenue share in the forthcoming quarters. However, the global downturn and a tough competitive landscape continue to pose threats to Haemonetics going forward.
Currently, Haemonetics carries a Zacks Rank #3 (Hold). Other well-placed stocks that are worth a look are Bio-Rad Laboratories, Inc. (BIO) and INSYS Therapeutics, Inc. (INSY) each carrying a Zacks Rank #1 (Strong Buy) and Boston Scientific Corp. (BSX) carrying a Zacks Rank #2 (Buy).
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