A month has gone by since the last earnings report for Abaxis,Inc. (NASDAQ:ABAX) . Shares have added about 6.5% in that time frame, outperforming the market.
Will the recent positive trend continue leading up to its next earnings release, or is ABAX due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Recent Earnings
Abaxis reported third-quarter fiscal 2018 adjusted earnings per share of 31 cents, beating the Zacks Consensus Estimate by 6.9%. Moreover, adjusted earnings rose 3.3% from the year-ago 30 cents.
Total Revenue
In the fiscal third quarter, Abaxis recorded revenues of $59.7 million, reflecting an increase of 13.1% from a year ago. The top line also surpassed the Zacks Consensus Estimate of $58 million. Foreign currency exchange fluctuations had a favorable 1% impact on the top line.
Segments in Detail
Revenues from North America (accounting for 77.7% of total revenues) rose 11.8% to $46.4 million in the reported quarter. Revenues from the international markets (accounting for the rest) improved 17.9% to $13.2 million.
Abaxis operates through three main segments — Veterinary, Medical and Other. In the reported quarter, Veterinary sales accounted for 81.1% of total sales, Medical contributed 17.1% while the remaining 1.8% was generated from Other.
Veterinary market revenues improved 12% year over year to $48.4 million, driven by a 12% uptick in veterinary consumable revenues to $37.9 million. Veterinary instrument revenues were up 12% year over year to $8.7 million.
Revenues from the medical market were up from $8.7 million in the same quarter last year to $10.2 million led by strength in Piccolo instrument as well as medical rotors. Also, revenues at the North American medical division totaled $7 million, up 25% year over year. On a global basis, Abaxis sold 228 Piccolos in the quarter compared with 212 a year ago.
Abaxis exhibited strong consumable growth, up 13% year over year to $45.5 million in the quarter. Within the consumable product lines, total rotor revenues were $31.9 million, up 13% from $28.2 million in the year-ago quarter. On a global basis, Abaxis sold 2.57 million rotor units in the quarter under review, up 13% from 2.28 million units in the year-ago quarter. Hematology reagents, rapid assays, i-STAT cartridges, coagulation cartridges and urine analysis strips also drove growth in veterinary consumable revenues.With solid contributions from feline test and test for canine specific lipase, revenues from rapid assay were major contributors to the top line in the reported quarter.
Moreover, total instruments’ sales rose 12% to $10.5 million on a rise in the sales of haematology, i-STAT, coagulation and Piccolo instruments. Also, impressive revenues from VetScan UA, a hand-held urine chemistry analyzer launched last September, contributed significantly to the top line.
Operational Updates
Gross profit in the third quarter rose 9.5% to $32.2 million. Gross margin contracted 180 basis points (bps) to 53.9%.
Research and development expenses increased 8.3% year over year to $5.2 million and sales and marketing expenses rose 29.2% to $13.7 million. General and administrative expenses also rose 50% to $4.8 million. The resultant operating income was down 20.4% to $8.6 million in the quarter and operating margin declined 610 bps to 14.4%.
Financial Update
Abaxis exited the fiscal third quarter with cash, cash equivalents and short-term investments of $161.6 million, compared with $148.8 million in the fiscal second quarter.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended upward during the past month. There have been two revisions higher for the current quarter. While looking back an additional 30 days, we can see even more upward momentum. There have been three moves up in the last two months. In the past month, the consensus estimate has shifted by 12.5% due to these changes.
VGM Scores
At this time, ABAX has a nice Growth Score of B, however its Momentum is doing a bit better with an A. However, the stock was also 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 B. If you aren't focused on one strategy, this score is the one you should be interested in.
Our style scores indicate that the stock is more suitable for momentum investors than growth investors.
Outlook
Estimates have been trending upward for the stock and the magnitude of these revisions looks promising. Interestingly, ABAX has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Abaxis,Inc. (ABAX): Free Stock Analysis Report
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