Here's Why Investors Should Retain Haemonetics (HAE) For Now
Haemonetics Corporation HAE is gaining from robust performance across the Hospital and Plasma business. The company ended the fourth quarter of fiscal 2022 with better-than-expected results. Positive revenue contributions from the acquired Vascular Closure business instill optimism. However, rising costs and a tough competitive scenario do not bode well for the company.
In the past year, the Zacks Rank #3 (Hold) stock has gained 7.8% versus a 26.5% fall of the industry and a 7.6% drop of the S&P 500.
The renowned medical device company has a market capitalization of $3.03 billion. Its adjusted earnings per share for the fiscal fourth quarter beat the Zacks Consensus Estimate by 8.3%.
In the past five years, the company registered earnings growth of 8.9% compared with 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 15.7% and 10.8%, respectively.
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Let’s delve deeper.
Factors At Play
Q4 Upsides: Haemonetics’ ended the fiscal fourth quarter with earnings and revenues beating the Consensus Estimate. Robust performance in the Hospital business on continued strength in the Hemostasis Management product line buoys optimism. Revenue contributions from acquired Vascular Closure exceeded the company’s expectations, raising investors’ confidence. The Plasma business registered impressive revenue growth in the reported quarter on an increase in U.S. plasma volume, price benefits and a $6-million stocking order. Expansion of gross margin is an added advantage.
Huge Potential of Hemostasis Management Franchise: Hemostasis Management, the company’s largest hospital product line, saw revenue growth of 12% in the fiscal fourth quarter. The company’s TEG franchise delivered robust performance within the United States. The business also benefited from strong growth in Europe, primarily driven by successful market penetration with the ClotPro viscoelastic elastic diagnostic device. Haemonetics continues to invest in its innovation agenda through clinical trials that build evidence for its Hemostasis Management products.
Upbeat Guidance: Haemonetics has issued its outlook for 2023. The company expects GAAP total revenue growth in the range of 5-9% on a reported basis and organic revenue growth in the range of 6-10%. The Zacks Consensus Estimate for 2023 revenues is pegged at $1.06 billion. The company expects full-year adjusted earnings per share in the band of $2.50-$2.90. The Zacks Consensus Estimate for the same is pegged at $2.72.
Downsides
Escalating Costs: During the fiscal fourth quarter, Haemonetics’ adjusted operating expenses were up 16.4% from the year-ago quarter. This increase was primarily driven by the acquisition of the Vascular Closure business and an increase in freight costs. These escalating operating expenses resulted in a 410-basis points contraction in adjusted operating margin, building pressure on the bottom line.
Economic Uncertainty: The uncertain economic scenario is a persistent challenge for Haemonetics. Unfavorable currency fluctuations have affected the company’s performance in the past few quarters. Unstable macroeconomic conditions due to the COVID-19 pandemic also continue to be headwinds.
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 profit.
Estimate Trend
In the past 30 days, the Zacks Consensus Estimate for Haemonetics’ fiscal 2023 earnings has moved down by 1.4% to $2.72.
The Zacks Consensus Estimate for fiscal 2023 revenues is pegged at $1.06 billion, suggesting a 6.4% rise from the year-ago reported number.
Key Picks
A few better-ranked stocks in the broader medical space are AMN Healthcare Services, Inc. AMN, Medpace Holdings, Inc. MEDP and UnitedHealth Group Incorporated UNH.
AMN Healthcare has a long-term earnings growth rate of 1.1%. The company surpassed earnings estimates in the trailing four quarters, delivering a surprise of 15.6%, on average. It currently flaunts 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 declined 1.8% versus the industry’s 63% fall.
Medpace has a historical growth rate of 27.3%. Medpace’s earnings surpassed estimates in the trailing four quarters, the average surprise being 17.1%. It currently has a Zacks Rank #2 (Buy).
Medpace has outperformed its industry in the past year. MEDP has declined 20.3% against the industry’s 63% fall.
UnitedHealth has an estimated long-term growth rate of 14.8%. UnitedHealth’s earnings surpassed estimates in the trailing four quarters, the average surprise being 3.7%. It currently carries a Zacks Rank #2.
UnitedHealth has outperformed the industry over the past year. UNH has gained 18.2% compared with 16.2% industry growth in the said period.
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