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Haemonetics (HAE) Business Recovery Continues, Macro Issues Ail

·4 min read

Haemonetics’ HAE top-line growth rides on drivers like Plasma, TEG, Hemostasis Management as well as the Vascular Closure business. However, a weakness in the Blood center franchise significantly affected Haemonetics’ results in the first quarter of fiscal 2023. The stock currently carries a Zacks Rank #3 (Hold).

Over the past six months, Haemonetics has outperformed its industry. The stock has gained 13.8% against the industry's 51.5% fall. Haemonetics exited the first quarter of fiscal 2023 with better-than-expected earnings and revenues.

The robust performance of the Hospital business, on continued strength in the Hemostasis Management product line, instills optimism. Robust contributions from the Vascular Closure business also seem promising. The expansion of both margins is an added advantage. The company-adjusted gross margin was 54.4%, up 712 basis points (bps) year over year. The primary drivers of this improvement were strong volume growth in Plasma and Hospital and, price and additional savings from the Operational Excellence Program.

Haemonetics Corporation Price

Haemonetics Corporation Price
Haemonetics Corporation Price

Haemonetics Corporation price | Haemonetics Corporation Quote

The adjusted operating margin was 14.9%, up 1314 bps from the year-ago quarter. Haemonetics continued to make additional investments to expand its manufacturing footprint in the reported quarter, including its new facility in Clinton, PA. The raised full-year outlook for revenues and earnings per share indicates continued growth momentum.

The fiscal first quarter saw encouraging performance by Haemonetics’ businesses. The Hospital business revenues grew 12.7% (up 14.9% on an organic basis) in the quarter amid staffing shortages and budgetary constraints in U.S hospitals, as well as continued lockdowns in China.

Under the Hospital segment, revenue growth in the Hemostasis Management and Vascular Closure product lines was 4.1% and 35.9% on a year-over-year basis, respectively. Within Vascular Closure, the company strengthened its leadership in the growing electrophysiology and interventional cardiology markets. Plasma collections also rebounded in the reported quarter, as the company continued to convert its U.S Plasma customers to the Nexus Plasma collection technology. Haemonetics expects to convert all its U.S. customers to the latest Nexus PCS and NexLynk DMS platform by the end of the second quarter of fiscal 2023.

Despite sluggish results in the Blood Center business, Whole Blood revenues grew 7%, led by favorable order timing among distributors in the Asia Pacific and EMEA, coupled with additional opportunities in North America.

On the flip side, the sluggish performance of the Blood Center business in the first quarter of fiscal 2023 amid blood shortages in a difficult collection environment is concerning. Blood Center revenues declined 7% in the fiscal first quarter. Moreover, Apheresis revenues fell 13% due to unfavorable order timing, lower revenues from convalescent Plasma, collection center staffing shortages in the United States and geopolitical risk.

A fall in short-term cash level raises apprehension. Weak solvency and stiff competition remain concerns. The company continues to be challenged by inflationary pressure in the global manufacturing and supply chain, including freight and raw material costs, previous divestitures and price adjustments.

Key Picks

A few better-ranked stocks in the broader medical space that investors can consider are AMN Healthcare Services, Inc. AMN, Patterson Companies, Inc. PDCO and McKesson Corporation MCK.

AMN Healthcare has a long-term earnings growth rate of 3.2%. The company surpassed earnings estimates in the trailing four quarters, delivering a surprise of 15.7%, on average. It currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

AMN Healthcare has outperformed its industry in the past year. AMN has lost 11.2% against the industry’s 38.2% fall.

Patterson Companies has an estimated long-term growth rate of 7.9%. The company’s earnings surpassed estimates in all the trailing four quarters, the average beat being 16.5%. It currently carries a Zacks Rank #2 (Buy).

Patterson Companies has underperformed its industry in the past year. PDCO has lost 17.4% compared with the industry’s 14.8% fall in the past year.

McKesson has an estimated long-term growth rate of 9.9%. The company surpassed earnings estimates in the trailing three quarters and missed in one, delivering a surprise of 13%, on average. It currently carries a Zacks Rank #2.

McKesson has outperformed its industry in the past year. MCK has gained 77.5% against the industry’s 14.8% fall.

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