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Haemonetics (HAE) Q4 Earnings Lag Estimates, Margins Expand

Zacks Equity Research

Haemonetics Corporation HAE delivered adjusted earnings per share (EPS) of 69 cents in the fourth quarter of fiscal 2020, reflecting 13.1% year-over-year growth. The bottom line, however, lagged the Zacks Consensus Estimate by 5.5%.

On a GAAP basis, net income was 34 cents per share, down 15% from the year-ago figure.

Full-year adjusted EPS was $3.31, reflecting a 38.5% increase from the year-earlier $2.39. The metric lagged the Zacks Consensus Estimate by 0.9%.

Total Revenues

Revenues declined 4.3% (up 0.7% on an organic basis) to $238.5 million in the fourth quarter of fiscal 2020. Further, the top line lagged the Zacks Consensus Estimate by 2.8%.

Full-year revenues were $988.5 million, reflecting a 2.2% increase from the year-ago period (up 6.3% organically). Revenues lagged the Zacks Consensus Estimate by 0.6%.

Haemonetics Corporation Price, Consensus and EPS Surprise

 

Haemonetics Corporation Price, Consensus and EPS Surprise

Haemonetics Corporation price-consensus-eps-surprise-chart | Haemonetics Corporation Quote


Quarterly Revenues by Product Categories

At Plasma, revenues of $111.9 million (accounting for 46.9% of total revenues) increased 3.8% year over year (11.7% on an organic basis) in the reported quarter. Plasma revenue growth in North America was 12.5%, including 11.8% growth in disposables.

Revenues at Blood Center (32.1%) declined 10.8% (10% on an organic basis) to $76.6 million.

Hospital revenues (19.2%) were down 8.6% (up 0.3% on an organic basis) to $45.8 million. Under the Hospital segment, organic revenue growth in the Hemostasis Management product line was 2.8% in the fourth quarter of fiscal 2020.

Service revenues (1.8%) were down 24.3% (24.8% on an organic basis) to $4.2 million.

Margins

Per the company, adjusted gross margin was 50.3%, up 320 basis points (bps) year over year on change in the pricing structure, favorable product mix and productivity savings.

Adjusted operating expenses as provided by the company in the fourth quarter of fiscal 2020 were $72.7 million, down 2.7% from $74.7 million in the year-ago quarter. The reduction in operating expenses resulted from productivity savings which were partially offset by continued investments in sales and marketing.

Adjusted operating income was $47.3 million in the quarter under discussion, up 10.5% from $42.8 million in the year-ago quarter. Meanwhile, adjusted operating margin expanded 270 bps year over year to 19.8%.

Financial Position

Haemonetics exited the fiscal 2020 with cash and cash equivalents of $137.3 million compared with $126.4 million at the end of the third quarter. Long-term debt at the end of the fiscal 2020 was $305.5 million, marking a reduction of 1.4% from $309.7 million at the end of the third quarter.

Cumulative cash flow from operating activities was $158.2 million at the end of fiscal 2020 compared with $159.3 million in the year-ago period (down 0.7%). It also reported free cash flow (before restructuring and turnaround costs) of $126.2 million during the same period, which recorded a stupendous increase of 192.7% from $43.1 million a year ago.

The company repurchased a total of 1,482,554 of its common shares for $175 million in fiscal 2020 through multiple accelerated share repurchase agreements entered into during the fiscal year. It has a remaining share repurchase authorization of $325 million. However, given the current economic situation due to the coronavirus pandemic, the company will prioritize allocating capital to support its business needs first.

Fiscal 2021 Guidance

Haemonetics expects to see greater COVID-19 impact on its fiscal 2021 results due to the persisting effects of social distancing guidelines and stay-at-home orders. Other factors which are expected to impact its fiscal 2021 results are decline in elective surgeries, restricted vendor access at customer sites and reallocation of hospital resources to critical ICU needs.

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. The company intends to issue its full-year guidance later in the fiscal year.

Our Take

Haemonetics exited the fourth quarter of fiscal 2020 with lower-than-expected results. Per the company, COVID-19 had limited impact on its fiscal 2020 performance across the globe. However, the impact was maximum in China and parts of Japan, and minimal elsewhere, including the United States and Europe.

The company derived benefits from complexity reduction initiatives, operational excellence program product mix and pricing structure. Further, sustained underlying demand for plasma-based medicines and continued momentum in new business generation and geographical expansion contributed to results despite the challenges posed by the outbreak. Hospital segment was characterized by new product launches and strong sales execution. Expansion of both margins is encouraging as well.

However, the company’s sluggish Blood Center business due to the imbalances in the supply and demand for blood products is concerning. Price and utilization rates pose further challenges for this segment apart from previously discontinued customer contracts and ongoing declines in blood utilization rates. Hospital segment suffered due to declines in procedures due to COVID-19, restricted access for sales teams and reallocation of funds to critical ICU needs within hospitals. The company is not issuing guidance for 2021.

Zacks Rank and Stocks to Consider

Haemonetics currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader medical space are Aphria Inc. APHA, Biogen Inc. BIIB and Eli Lilly and Company LLY.

Aphria reported third-quarter fiscal 2020 adjusted EPS of 2 cents, comparing favorably with the Zacks Consensus Estimate of a loss of 4 cents. Net revenues of $64.4 million outpaced the consensus estimate by 14.6%. The company carries a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Biogen currently carries a Zacks Rank #2. It reported first-quarter 2020 adjusted EPS of $9.14, surpassing the Zacks Consensus Estimate by 18.1%. Revenues of $3.53 billion outpaced the consensus mark by 3.2%.

Eli Lilly delivered first-quarter 2020 EPS of $1.75, outpacing the Zacks Consensus Estimate by 12.9%. Revenues of $145.3 million surpassed the consensus estimate by 6.3%. The company currently sports a Zacks Rank #1.

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