We recently reiterated our ‘Neutral’ rating on Abaxis, Inc. (ABAX) with a target price of $28, based on a P/E of 34.1x our fiscal 2011 EPS estimate of 82 cents. Abaxis’ results for the third quarter fiscal 2010 were mixed.
Earnings per share for the third quarter was 15 cents, below the Zacks Consensus Estimate of 17 cents. However, earnings was flat on a year-over-year basis.
Total revenue in the third quarter increased 15% year over year to $31 million, fueled by higher instrument unit sales. Revenues from instrument sales and consumables increased 6% and 20% year over year, respectively, in the third quarter. Total medical and veterinary instrument sales increased 37% year over year to 1,212 units.
In terms of customer group: Veterinary market sales increased 33% year over year to $23.9 million due to higher veterinary reagent disc sales. However, Medical market sales declined 28% year over year to $5.2 million primarily due to a decline in instrument sales to the U.S. government and distributors in North America.
On a geographic basis, North America contributed 80% to total revenues and increased 9% year over year. Abaxis’ international operations increased 48% year over year.
Gross margin increased 300 basis points (bps) year over year to 59.0%. Despite a higher gross margin, Abaxis reported higher operating expenses that were primarily responsible for lower operating and net margins. Both operating and net margins declined 20 bps and 130 bps year over year to 17.5% and 11.1%, respectively.
Abaxis is a manufacturer of portable medical (human) and veterinary (animal) blood analysis systems. For medical use, the systems are marketed under the name “Piccolo” and measure metabolic, hepatic (liver), kidney, and renal (blood) function. Other uses include measuring electrolytes and cholesterol.
The systems used for veterinary (animal) use are marketed under the name “VetScan” and used for the following animal profiles: avian/reptilian, large animal, mammalian (liver) and equine (horse). Other uses include a comprehensive diagnostic profile, as well as a thyroxine/cholesterol test.
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