Why You Should Add Haemonetics (HAE) to Your Portfolio Now
Haemonetics HAE is well-poised for growth in the coming quarters, backed by the impressive business performance of the Hospital and Plasma segments. The company recently received FDA clearance for advancements to its NexSys PCS plasma collection system. The performance of the Hemostasis Management segment in its largest market, North America, is highly promising. However, its balance sheet is burdened with huge debt. Haemonetics’ operations are also subject to intense competition from its peers.
In the past year, this Zacks Rank #2 (Buy) stock has gained 16.9% against the 2% fall of the industry and the 13.5% rise of the S&P 500 composite.
The global provider of blood and plasma supplies and services has a market capitalization of $4.58 billion. The company has an earnings yield of 4.23% against the industry’s -1.36% yield. HAE surpassed estimates in all the trailing four quarters, delivering an average earnings surprise of 19.39%.
Let’s delve deeper.
Tailwinds
Strength in the Recovery of Businesses: In the first quarter of fiscal 2024, the Hospital business was particularly strong in North America, supported by improved procedure volume and staffing levels at the domestic hospitals. In Vascular Closure, higher utilization rates were driven by HAE’s clinical efforts and increased procedure volumes in hospitals across the United States.
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International commercialization of VASCADE is on track. The company received approval for VASCADE MVP in Japan and initiated clinical use of the Vascular Closure products in key accounts in Germany and Italy. In Blood Center, Apheresis revenue growth was driven by strong collections, particularly in Plasma, coupled with favorable order timing among distributors. Whole Blood revenues benefited from the opportunity to serve competitors' customers in need.
Potential Upsides of Plasma Franchise: The company continued to benefit from the strong momentum in collections recovery and technology that stand apart for yield, efficiency and cost-per-liter improvements unmatched in the plasma industry.
The highly differentiated NexSys Plasma collection system offers 9% to 12% additional plasma yield, impeccable safety, connectivity and a superior donor experience backed by real-world evidence from tens of millions of collections. In addition, the company is bringing along powerful FDA-cleared innovation, featuring a redesigned bowl and the Express Plus software to shorten average collection time, optimize plasma center efficiency and reduce cost per liter.
Huge Potential of Hemostasis Management Franchise: Under the Hospital business, Hemostasis Management saw strong growth over the past few quarters. In the first quarter of fiscal 2024, growth in North America, the company’s largest market, was driven by increased utilization of TEG, benefits from pricing and strong capital sales. Internationally, all of the key markets in Europe delivered strong double-digit growth in the quarter.
Transfusion Management gained market shares in North America and Europe, aided by the recent agreement with Epic to offer SafeTrace Tx to their global network of hospital customers. Cell Salvage also had a strong quarter in North America, backed by the increased utilization in hospitals in the United States.
Downsides
Debt Profile: Haemonetics exited the first quarter of fiscal 2024 with cash and cash equivalents of $751 million compared with $259.5 million as of Mar 31, 2023. The long-term debt was $754.1 million, much higher than the corresponding cash and cash equivalents. This indicates weak solvency. Also, the company’s debt-to-capital of 46.5% is relatively higher than the industry’s 35.5%.
Competitive Landscape: Haemonetics operates in a very competitive environment, both for manual and automated systems, which includes companies like MAK Systems, ROTEM analyzers, Medtronic, e Fresenius, MacoPharma and Terumo, among others. Slower-than-expected product adoption by customers, especially the American Red Cross, is likely to reduce the company’s revenues and profit.
Estimate Trend
Haemonetics has been witnessing a positive estimate revision trend for 2023. The Zacks Consensus Estimate for earnings has moved up from $3.58 to $3.82 in the past 30 days.
The Zacks Consensus Estimate for the company’s 2023 revenues is pegged at $1.26 billion, suggesting an 8.06% increase from the year-ago reported number.
Other Key Picks
Some other top-ranked stocks in the broader medical space are Align Technologies ALGN, SiBone SIBN and Quanterix QTRX.
Align Technologies has a long-term estimated earnings growth rate of 17.5% compared with the industry’s 12.3%. ALGN’s earnings surpassed the Zacks Consensus Estimate in three of the trailing four quarters and missed the same in one, the average negative surprise being 1.76%. Its shares have gained 47.4% compared to the industry’s 13.3% rise in the past year.
ALGN carries a Zacks Rank #2 at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
SiBone, carrying a Zacks Rank #2 at present, has a long-term estimated earnings growth rate of 22.9% compared with the industry’s 16.5%. Shares of the company have rallied 26.7% compared with the industry’s 3.5% growth over the past year.
SIBN’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 20.37%.
Quanterix, carrying a Zacks Rank #2 at present, has an estimated earnings growth rate of 62.8% for the current year compared with the industry’s 15.2%. Shares of QTRX have gained 173.8% against the industry’s 2% decline over the past year.
Quanterix’s earnings surpassed estimates in each of the trailing four quarters, deliveringan average earnings surprise of 30.39%. In the last reported quarter, it posted an earnings surprise of 55.56%.
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