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It has been about a month since the last earnings report for Haemonetics (HAE). Shares have lost about 5.8% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Haemonetics due for a breakout? 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 drivers.
Haemonetics Q3 Earnings Top Estimates, Margin Contracts
Haemonetics Corporation delivered adjusted earnings per share of 81 cents in the third quarter of fiscal 2021, reflecting a 13.8% year-over-year decline. The bottom line, however, exceeded the Zacks Consensus Estimate by 19.1%.
On a GAAP basis, net income was 62 cents per share, up 6.9% from the year-ago earnings per share figure.
Revenues declined 7.2% (down 5.7% on an organic basis) to $240.4 million in the third quarter of fiscal 2021. However, the top line surpassed the Zacks Consensus Estimate by 6.8%.
The year-over-year plunge in revenues was primarily due to the negative impact of the pandemic.
Quarterly Revenues by Product Categories
At Plasma, revenues of $101.9 million (accounting for 42.4% of total revenues) decreased 15.4% year over year (down 13.4% on an organic basis) in the reported quarter. According to the company in the quarter, the pandemic continued to have a pronounced effect on the U.S.-sourced plasma donor pool. However, the revenue decline was partially offset by one-time safety stock order of plasma disposables worth $6 million.
Revenues at Blood Center (33.7%) fell 3% (down 1.4% on an organic basis) to $80.9 million.
Hospital revenues (21.9%) were up 4.7% (up 5% on an organic basis) to $52.7 million. Under the Hospital segment, organic revenue growth in the Hemostasis Management product line was 11.3% in the third quarter of fiscal 2020, driven by strong U.S. disposable sales.
Service revenues (2%) were down 0.1% (up 4.3% on an organic basis) to $4.9 million.
Per the company, adjusted gross margin was 51.4%, down 71 basis points (bps) year over year on higher operational costs, lower volume and unfavorable product mix. However, this was partially offset by gross productivity savings from the Operational Excellence Program and lower depreciation.
Adjusted operating expenses in the third quarter of fiscal 2021 were $80.9 million, down 5% from $85.3 million in the year-ago quarter. The reduction in operating expenses resulted from productivity savings and cost-containment actions taken to offset the negative effects related to COVID-19, which were partially offset by continued investments.
Adjusted operating income was $39.3 million in the quarter under discussion, down 8.1% from $42.8 million in the year-ago quarter. Meanwhile, adjusted operating margin contracted 16 bps year over year to 16.4%.
Haemonetics exited the third quarter of fiscal 2021 with cash and cash equivalents of $189 million compared with $279.2 million at the end of the second quarter of fiscal 2021. Long-term debt at the end of the third quarter of fiscal 2021 was $293 million, down from $297 million at the end of the first quarter of fiscal 2021.
Cumulative net cash flow from operating activities at the end of the fiscal third quarter was $107.3 million compared with $111.8 million a year ago.
Capital expenses (net of proceeds from sale of property, plant and equipment) incurred by the company were $24.3 million, up from the year-ago $21.8 million. It also reported free cash flow (before restructuring and turnaround costs) of $99.1 million during the same period, up 4.1% from $95.2 million a year ago.
The company is currently unable to ascertain the scope and duration of the pandemic as well as quantify the actual impact and timing of the associated economic recovery. It is currently in the process of assessing the potential scenarios for the economic impact of COVID-19 and the related effect on healthcare in the coming period.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates.
At this time, Haemonetics has an average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. Following the exact same course, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Haemonetics has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
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