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Why Is Haemonetics (HAE) Down 0.1% Since Last Earnings Report?

Zacks Equity Research

A month has gone by since the last earnings report for Haemonetics (HAE). Shares have lost about 0.1% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Haemonetics due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Haemonetics Beats on Q2 Earnings

Haemonetics Corporation delivered adjusted earnings per share (EPS) of 87 cents in the second quarter of fiscal 2020, reflecting 55.4% year-over-year growth from 56 cents. The bottom line also surpassed the Zacks Consensus Estimate by 20.8%.

On a reported basis, net income was 72 cents per share, up from the year-ago figure of 56 cents (an increase of 28.6%).

Total Revenues

Revenues rose 4.5% (up 9% on an organic basis) to $252.6 million from the second quarter of fiscal 2019. Further, the top line surpassed the Zacks Consensus Estimate by 1%.

The company continued to rollout the NexSys PCS device and NexLynk DMS donor management software.

Revenues by Product Categories

At Plasma, revenues of $115.9 million (accounting for 45.9% of total revenues) increased 8.5% year over year (up 14.6% on an organic basis) in the reported quarter. Plasma revenue growth in North America was 14.7%, including 11% growth in disposables.

Revenues at Blood Center (32.5%) declined 0.3% (up 0.2% on an organic basis) to $81.9 million.

Hospital revenues (19.7%) were up 3.6% (10.1% on an organic basis) to $49.7 million. Under the Hospital segment, organic revenue growth in the Hemostasis Management product line was 16% in the second quarter of fiscal 2020.

Margins

Per the company, adjusted gross margin was 52.6%, up 440 basis points (bps) year over year due to change in the pricing structure, product mix and productivity.

Adjusted operating income was $57.8 million in the quarter under discussion, up 48.6% from $38.9 million in the year-ago quarter. Meanwhile, adjusted operating margin expanded 680 bps year over year to 22.9%.

Financial Position

Haemonetics exited the second quarter of fiscal 2020 with cash and cash equivalents of $112 million compared with $190.2 million at the end of fiscal 2019. Long-term debt at the end of the fiscal second quarter was $313.9 million, marking a reduction of 1.3% from $318.1 million at the end of fiscal 2019.

The company generated operating cash flow of $32.5 million in the fiscal second quarter compared with $80.5 million a year ago (down 59.6%). It also reported free cash flow (before restructuring and turnaround costs) of $30.8 million during the same period, which was up 48.2% from $20.8 million a year ago.

Fiscal 2020 Guidance

Haemonetics reaffirmed its reported revenue guidance for fiscal 2020. The company reiterated yearly organic revenue growth at 6-8%. Coming to segmental revenues, on an organic basis, the view for Plasma revenues remained at 13-15%. Hospital revenue growth projection is maintained at 11-13%. Blood Center revenues are once again projected to decline 4-6% from the year-earlier number. The Zacks Consensus Estimate for fiscal 2020 revenues is pegged at $1.01 billion.

However, the company raised its 2020 adjusted EPS guidance to $3.10-$3.20 (up from $2.95-$3.15 mentioned earlier). The consensus estimate of $3.07 lies within the company’s guided range.

 

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates revision.

VGM Scores

At this time, Haemonetics has an average Growth Score of C, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Haemonetics has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.



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