Here's Why You Should Hold on to Haemonetics (HAE) For Now
Haemonetics Corporation HAE has been gaining from the robust performance by the Hospital segment. Under the Hospital business, the Hemostasis Management franchise recorded strong growth in the third quarter of fiscal 2022. A recovery in plasma collections buoys optimism for the company. However, declining sales and macroeconomic challenges raise apprehension.
Over the past year, the Zacks Rank #3 (Hold) stock has declined 51.4% against a 20.1% fall of the industry and a 5.7% rise of the S&P 500.
The renowned medical device company has a market capitalization of $2.95 billion.
Over the past five years, the company registered earnings growth of 7%, ahead of the industry’s 9.1% rise and the S&P 500’s 13.4% increase. The company’s projected growth rate of 10% for the next five years compares with the industry and the S&P 500’s projected growth rate of 16.6% and 11%, respectively.
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Let’s delve deeper.
Factors At Play
Recovery Across Businesses: We are encouraged by the ongoing recovery across Haemonetics’ businesses in the fiscal third quarter. The Hospital business revenues grew 56.3% on a continued rebound in procedures amid challenges posed by hospital staffing shortages and supply-chain disruptions in the Asia Pacific. The company also saw a rebound in plasma collections. It anticipates strong demand for plasma-derived therapies and capital investments by customers to contribute to the ongoing rebound in plasma collections as the effects of the pandemic fade.
Potential Upsides of Plasma Franchise: Haemonetics has been witnessing strong growth in the Plasma franchise for quite some time. During the fiscal third quarter, the company continued to benefit from the NexSys device and NexLynk donor management software (DMS), backed by increased customer adoption. The company successfully converted several hundred plasma centers to the NexSys platform without interruption to their daily collections.
The company has made significant progress in terms of the Persona technology, as it expects more plasma centers to be using its personalized nomogram by the end of this fiscal year.
Huge Potential of Hemostasis Management Franchise: Hemostasis Management, the company’s largest hospital product line, saw revenue growth of 18% in the fiscal third quarter. The upside was driven by the growing uptake of the company’s TEG 6s devices and increased utilization of cartridges in North America. The business also benefited from sales growth in Europe, where the ClotPro viscoelastic diagnostic device drove disproportionate growth.
Haemonetics continues to invest in its innovation agenda through clinical trials that build evidence for its Hemostasis Management products.
Downsides
Sales Scenario Dull: In the fiscal third quarter, Haemonetics’ Blood Center revenues declined 6.5% year over year, as the emergence of the Omicron variant disrupted U.S. blood collections. Meanwhile, Plasma revenues fell 5.4% year over year primarily due to disruption from Omicron and a $6-million stocking order in the prior year.
Economic Uncertainty: Unfavorable currency fluctuations have been affecting Haemonetics’ performance over the past few quarters, and no respite is expected in the near term. The company continues to be challenged by inflationary pressure in the global manufacturing and supply chain, including freight and raw material costs and price adjustments.
Competitive Landscape: Haemonetics operates in a very competitive environment, both for manual and automated systems, which includes companies like MAK Systems and ROTEM analyzers, among others. Slower-than-expected product adoption by customers, especially the American Red Cross, might reduce the company’s revenues and profits.
Estimate Trend
Haemonetics has been witnessing a positive estimate revision trend for 2022. Over the past 30 days, the Zacks Consensus Estimate for its earnings has moved north by 0.4% to $2.53.
The Zacks Consensus Estimate for fiscal 2022 revenues is pegged at $987.76 million, suggesting a 13.5% rise from the 2021 reported number.
Key Picks
A few better-ranked stocks in the broader medical space are Owens & Minor, Inc. OMI, Abiomed, Inc. ABMD and Henry Schein, Inc. HSIC.
Owens & Minor has a long-term earnings growth rate of 8.8%. Owens & Minor’s earnings surpassed estimates in the trailing four quarters, delivering a surprise of 29.5%, on average. It currently flaunts a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Owens & Minor has outperformed the industry over the past year. OMI has gained 15.9% against a 20.1% industry decline in the said period.
Abiomed has an estimated long-term growth rate of 20%. Abiomed’s earnings surpassed estimates in the trailing four quarters, the average surprise being 9.2%. It currently carries a Zacks Rank #2.
Abiomed has underperformed the industry over the past year. ABMD has lost 9.8% against the industry’s 5.6% fall over the past year.
Henry Schein has an estimated long-term growth rate of 11.8%. Henry Schein’s earnings surpassed estimates in the trailing four quarters, the average surprise being 25.5%. It currently sports a Zacks Rank #2.
Henry Schein has outperformed the industry over the past year. HSIC has gained 29.7% compared with the industry’s 5.2% rise over the past year.
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