Haemonetics Corporation (HAE) reported an adjusted EPS of 85 cents in the fourth quarter of fiscal 2011, surpassing the Zacks Consensus Estimate of 83 cents and the year-ago quarter’s 75 cents. For the full year, the adjusted EPS came in at $3.27, beating the Zacks Consensus Estimate of $3.25 and the previous year’s $2.85.
The company reported revenues of $170 million in the quarter, up 1% compared with the year-ago period. However, revenues were lower than the Zacks Consensus Estimate of $181 million. After considering an extra week in fiscal 2010, revenues were up 8%. Revenues from the domestic market increased 1.5% to $80.2 million, while international revenues came down by 0.3% to $89.8 million during the quarter. For fiscal 2011, revenues increased 5% to $677 million (up 7% excluding the impact of an extra week in fiscal 2010) but lower than the Zacks Consensus Estimate of $686 million.
Haemonetics earns about 81% of its revenues from the sale of disposables – plasma, blood bank and hospital disposables. While revenues from plasma disposables remained almost unchanged at $54.9 million during the quarter, sales declined in both blood bank (down 1.4% to $51.7 million) and hospital disposables (down 5.6% to $31 million). The remaining 19% of revenues is derived from software solutions and equipment, which recorded sales of $17.7 million (up 75.3% from the year-ago quarter) and $14.6 million (up 22%), respectively.
Plasma business has been negatively impacted by a change in collection practices in Japan. Within blood bank disposables, revenues from platelets declined 1.4% ($39.13 million). Moreover, revenues from red cell disposables were down 1.6% ($12.5 million) due to a decline in demand for red cells as a result of declining surgical volumes.
The declining trend of surgical volumes also impacted surgical disposables (under hospital disposables) by 5.5% to $17 million. In addition, revenues derived from OrthoPAT declined 8.1% to $9.1 million while diagnostics (consists principally of TEG Thrombelastograph Hemostasis Analyzer) remained almost unchanged at $4.8 million.
Outlook
Haemonetics provided its outlook for fiscal 2012. The company expects to record revenue growth of 4%−6%; 8%−10% growth of operating income resulting in adjusted EPS of $3.50−$3.62. Moreover, the company expects its gross and operating margins to improve by 200 basis points and 70 basis points, respectively. The free cash flow guidance stand at $85 million. The Zacks Consensus Estimate of $3.55 is within the company’s range.
Recommendation
The low global penetration and demand outstripping supply provides a positive long-term thesis for investing in the blood processing and supply chain management industry. However, the fourth quarter has been disappointing for the company with regard to all its businesses. Moreover, we remain cautious about the decline in surgical procedures and the challenges being faced by the Plasma business
We are currently Neutral on Haemonetics, which also corresponds to the Zacks #3 Rank (hold) in the short term.
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