Haemonetics (HAE) Q3 Earnings & Revenues Beat, Margins Expand

Haemonetics Corporation (NYSE:HAE) delivered adjusted earnings per share (EPS) of 94 cents in the third quarter of fiscal 2020, reflecting 49.2% year-over-year growth. The bottom line also surpassed the Zacks Consensus Estimate by 23.7%.

On a GAAP (reported) basis, net income was 58 cents per share, up 65.7% from the year-ago figure.

Total Revenues

Revenues rose 4.7% (up 8.2% on an organic basis) to $258.9 million from the third quarter of fiscal 2019. Further, the top line surpassed the Zacks Consensus Estimate by 2.3%.

The company continued to benefit from the NexSys device and NexLynk DMS (donor management software) backed by increased customer adoptions.

Revenues by Product Categories

At Plasma, revenues of $120.4 million (accounting for 46.5% of total revenues) increased 6.9% year over year (up 12.9% on an organic basis) in the reported quarter. Plasma revenue growth in North America was 13.3%, including 9.5% growth in disposables.

Revenues at Blood Center (32.2%) rose 0.7% (up 0.6% on an organic basis) to $83.4 million.

Hospital revenues (19.4%) were up 6.4% (11.4% on an organic basis) to $50.3 million. Under the Hospital segment, organic revenue growth in the Hemostasis Management product line was 19.8% in the third quarter of fiscal 2020.

Margins

Per the company, adjusted gross margin was 52.1%, up 480 basis points (bps) year over year due to change in the pricing structure, favorable product mix and productivity savings.

Adjusted operating income was $61.6 million in the quarter under discussion, up 44.3% from $42.7 million in the year-ago quarter. Meanwhile, adjusted operating margin expanded 650 bps year over year to 23.8%.

Financial Position

Haemonetics exited the third quarter of fiscal 2020 with cash and cash equivalents of $126.4 million compared with $112 million at the end of the second quarter. Long-term debt at the end of the fiscal third quarter was $309.7 million, marking a reduction of 1.4% from $313.9 million at the end of second quarter.

Cumulative cash flow from operating activities was $111.8 million at the end of the third quarter compared with $138.6 million in the year-ago period (down 19.4%). It also reported free cash flow (before restructuring and turnaround costs) of $95.2 million during the same period, which was up 65.5% from $57.5 million a year ago.

Fiscal 2020 Guidance

Haemonetics reaffirmed its reported revenue guidance for fiscal 2020 within the band of 3-5%. The company reiterated yearly organic revenue growth at 6-8%. The Zacks Consensus Estimate for fiscal 2020 revenues is pegged at $1 billion.

Coming to segmental revenues, on an organic basis, the view for Plasma revenue growth remained at 13-15%. Plasma revenue guidance includes 14–16% organic growth in North America.

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.

However, the company raised its 2020 adjusted EPS guidance to $3.30-$3.40 (up from $3.10-$3.20 mentioned earlier). The consensus estimate for the metric is pegged at $3.16.

Our Take

Haemonetics exited the third quarter of fiscal 2020 with better-than-expected results. Per the company, benefits from complexity reduction initiatives, operational excellence program and the share repurchase program along with higher market demand and success from product launches helped it pull off an impressive performance. Sustained underlying demand for plasma-based medicines and continued momentum in new business generation and geographical expansion contributed to results. The company is also reaping benefits from software upgrades and competitive conversions.

However, the company’s sluggish Blood Center business due to the ongoing decline in whole blood utilization rates in North America and moderating overall top-line growth raise concern. Other concerns are decline in Blood Center software due to previously discontinued customer contracts, and depreciation costs related to both NexSys device placements and expansion of the company’s plasma production capacity.

Zacks Rank and Other Performances

Currently, Haemonetics carries a Zacks Rank #3 (Hold).

Some other stocks which reported solid results this earning season are Stryker Corporation (NYSE:SYK) , Accuray Incorporated (NASDAQ:ARAY) and ResMed Inc. (NYSE:RMD) .

Stryker delivered fourth-quarter 2019 adjusted EPS of $2.49, outpacing the Zacks Consensus Estimate by 1.2%. Fourth-quarter reported revenues of $4.13 billion surpassed the Zacks Consensus Estimate by 0.7%. The company carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Accuray reported second-quarter fiscal 2020 adjusted earnings per share (EPS) of a penny, comparing favorably with the Zacks Consensus Estimate of a loss of 7 cents. Net revenues of $98.8 million outpaced the Zacks Consensus Estimate by 0.3%. The company sports a Zacks Rank #1.

ResMed, with a Zacks Rank #2, reported second-quarter fiscal 2020 adjusted EPS of $1.21, surpassing the Zacks Consensus Estimate by 19.8%. Its revenues of $736.2 million outpaced the consensus mark by 1.5%.

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