Abaxis (ABAX) Posts Solid Q4 Amid International Headwind

On May 18, 2016, we issued an updated research report on Abaxis, Inc. (NASDAQ:ABAX) . The stock currently carries a Zacks Rank #4 (Sell).

Abaxis delivered a strong financial performance in the fourth quarter of fiscal 2016, wherein the bottom line exceeded the Zacks Consensus Estimate while the top line met the mark. We are encouraged by the company’s stupendous performance with regard to its VetScan Rapid Tests (81% increase in its annual revenue), a relatively new business that complements its VetScan reagent discs.

Abaxis continues to remain a strong player in the veterinary market, with solid sales from its veterinary business accounting for 81.5% of total revenue in the fourth quarter of fiscal 2016. This business of Abaxis witnessed 9% year-over-year improvement on account of strong growth in veterinary consumables despite soft instrument sales.

Evidently, global sales of veterinary rotor units rose 6%, driven by high-single-digit growth observed in the markets of North America. In terms of top line, global veterinary rotor revenues also increased 6% during the quarter.

Moreover, the strong portfolio of consumable products looks promising and is expected to generate significant cash flow down the line.

On the flip side, we note that late in the fourth quarter, Abaxis annualized its Abaxis Veterinary Reference Laboratories (AVRL) business divestment. We still believe that this has weakened the company’s foothold in the growing market of reference laboratory. Also, the company faces tough currency headwinds in the international market, similar to several other U.S.-based companies with operations abroad.

Stocks to Consider

Investors interested in the broader medical sector can consider stocks like ICU Medical, Inc. (NASDAQ:ICUI) , LeMaitre Vascular, Inc. (NASDAQ:LMAT) and NuVasive, Inc. (NASDAQ:NUVA) . All the three stocks carry a Zacks Rank #2 (Buy).