Haemonetics Corporation HAE is gaining from continued strength in the Hospital business, particularly across the Hemostasis Management and Vascular Closure product lines. The company posted better-than-expected results for the first quarter of fiscal 2023. The ongoing rebound in plasma collections buoys optimism. However, declining Blood Center revenues and persistent macroeconomic headwinds raise apprehension.
In the past year, the Zacks Rank #3 (Hold) stock has gained 12.8% versus a 51.1% fall of the industry and a 13.8% decline of the S&P 500.
The renowned medical device company has a market capitalization of $3.82 billion. In the past five years, the company registered earnings growth of 8.9% compared with the industry’s 9.7% rise and the S&P 500’s 13.4% increase. Its earnings surpassed estimates in the trailing four quarters and missed on one occasion, delivering an average surprise of 6.3%.
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Let’s delve deeper.
Factors At Play
Q1 Upsides: Haemonetics exited the fiscal first quarter with better-than-expected earnings and revenues. The robust performance in 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.
Haemonetics continued to invest 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 the continuity of this growth momentum.
Recovery Across Businesses: We are upbeat about the impressive fiscal-first quarter results across Haemonetics’ businesses. The Hospital business revenues grew 12.7% in the quarter amid staffing shortages and budgetary constraints in U.S hospitals, as well as continued lockdowns in China. Under the Hospital segment, the Hemostasis Management and Vascular Closure product lines saw sales growth of 4.1% and 35.9%, respectively. Meanwhile, plasma collections continued to rebound as the company converted its U.S Plasma customers to the Nexus Plasma collection technology.
Despite sluggish results in the Blood Center business, Whole Blood revenues increased 7% in the quarter under review.
Potential Upsides of Plasma Franchise: Haemonetics has been witnessing strong growth in Plasma franchise for quite some time. During the fiscal first quarter, Plasma revenues grew 42.5% on a year-over-year basis. The business saw 47% growth in North America, the company’s largest market, which accounts for more than 90% of the total Plasma sales. The upside was driven by substantial contributions from both volume and price.
Excluding CSL, U.S. plasma collection volume rose 40% year over year, as the company recorded robust growth in collections across most centers. Meanwhile, Europe plasma collections also registered strong double-digit growth in the fiscal first quarter.
Blood Center Results Dull: Haemonetics registered a sluggish performance by the Blood Center business amid blood shortages in a difficult collections environment. Revenues declined 7% on a year-over-year basis in the fiscal first quarter. Apheresis sales fell 13% due to unfavorable order timing, lower revenue from convalescent Plasma, collection center staffing shortages in the United States and geopolitical risk.
Economic Uncertainty a Concern: Haemonetics continues to be faced with macroeconomic challenges related to inflationary pressure in the global manufacturing and supply chain, including freight and raw material costs. Unfavorable foreign exchange movements and pandemic-led disruptions are other headwinds trailing the company.
Competitive Landscape: Haemonetics operates in a very competitive environment, both for manual and automated systems, which includes companies like MAK Systems, ROTEM analyzers, etc. Slower-than-expected product adoption by customers, especially the American Red Cross, might reduce the company’s revenues and profit.
In the past 90 days, the Zacks Consensus Estimate for Haemonetics’ fiscal 2023 earnings moved up by 2.9% to $2.79.
The Zacks Consensus Estimate for fiscal 2023 revenues is pegged at $1.09 billion, suggesting a 9.9% rise from the year-ago reported number.
A few better-ranked stocks in the broader medical space that investors can consider are AMN Healthcare Services, Inc. AMN, ShockWave Medical, Inc. SWAV 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 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 lost 12.8% against the industry’s 38.3% fall.
ShockWave Medical, sporting a Zacks Rank #1 at present, has an estimated growth rate of 33.1% for 2023. The company’s earnings surpassed estimates in all the trailing four quarters, the average beat being 180.1%.
ShockWave Medical has outperformed its industry in the past year. SWAV has gained 31.1% against the industry’s 32.6% fall.
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 (Buy).
McKesson has outperformed its industry in the past year. MCK has gained 76% against the industry’s 14.5% fall.
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