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Here's Why You Should Retain Haemonetics (HAE) Stock for Now
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Haemonetics Corporation (HAE - Free Report) registered a year-over-year increase in revenues on recovery across businesses in the first quarter of fiscal 2022. Strong end-market demand for NexSys PCS system with Persona technology looks encouraging. Expansion of both company-adjusted margins buoys optimism as well. However, sluggish growth in Blood Center business and escalating expenses do not bode well.
Over the past year, the Zacks Rank #3 (Hold) stock has declined 29.4% against 10.8% growth of the industry and a 29.7% rise of the S&P 500.
The renowned medical device company has a market capitalization of $3.20 billion. Its first quarter of fiscal 2022 earnings surpassed the Zacks Consensus Estimate by 6.4%.
Over the past five years, the company registered earnings growth of 7%, ahead of the industry’s 5.8% rise and the S&P 500’s 2.8% increase. The company’s long-term projected growth of 10% compares with the industry’s growth projection of 15.8% and the S&P 500’s expectation of 11.3% growth.
Image Source: Zacks Investment Research
Let’s delve deeper.
Q1 Upsides: Haemonetics exited the first quarter of fiscal 2022 with better-than-expected earnings and revenues. The company-adjusted gross margin was 54.7%, up 750 basis points year over year. The primary drivers of this improvement were the addition of Vascular Closure from the acquisition of Cardiva Medical, Inc. (Cardiva), productivity savings from the Operational Excellence Program, favorable product mix and improved operating efficiency. The recently-acquired VASCADE vascular closure technology exceeded the company’s expectations, with strong revenue growth in the reported quarter.
Recovery Across Businesses: We are encouraged by the impressive fiscal first quarter performance across all operating segments. Plasma collections in Europe showed continued recovery, specifically in Czech Republic and Hungary, driven by fewer COVID-related restrictions and plasma center growth. The company also witnessed growth in the adoption and utilization of TEG disposables and strong instrument placements. Hospital business revenues grew 26% in the quarter, primarily driven by continued improvement in hospital procedures on increased utilization of disposables, strong capital sales in North America, and new business opportunities in Europe. Platelet collections also recovered fully in Japan. The company experienced strong market demand for platelets in China, driven by expansion in Tier 2 markets.
Plasma Franchise Grows: At present, Haemonetics is witnessing plasma market growth above historic rates, driven by an industry striving to double collections by 2025 and the rising demand for plasma-based medicines. North America disposables revenues increased 3% in the fiscal first quarter, driven by improvement in collection volumes. The company registered double-digit growth in plasma software revenues in the quarter, led by recovery in plasma collection volumes and the Donor 360 app. Haemonetics also made significant progress with the Persona technology during the quarter. We are upbeat about strong end-market demand for NexSys PCS system with Persona technology.
Downsides
Sluggish Blood Center Business: The company’s sluggish Blood Center business performance in the first quarter of fiscal 2022 due to pandemic-led business disruptions is concerning. Blood center revenues declined 6% in the fiscal first quarter, led by lower collection volumes and discontinued customer contracts in North America. Further, the company expects a decline of 6-8% in blood center revenues for fiscal 2022.
Escalating Costs and Operating Expenses: The rise in restructuring-related costs is building pressure on the bottom line for Haemonetics. Adjusted operating expenses in the first quarter of fiscal 2022 rose 36.7% year over year. The increase was primarily driven by a rise in variable compensation and the acquisition of Cardiva Medical, an increase in variable compensation and continued investments.
Highly Leveraged Balance Sheet: Haemonetics’ total debt-to-capital ratio of 0.53 for the first quarter of fiscal 2022 stands at a high level, indicating a highly leveraged balance sheet. It represents a significant rise from 0.29 at the end of the fiscal fourth quarter.
Estimate Trend
Over the past 30 days, the Zacks Consensus Estimate for Haemonetics’ earnings has moved down by 0.4% to $2.77.
The Zacks Consensus Estimate for second-quarter fiscal 2022 revenues is pegged at $245.89 million, suggesting a 17.38% rise from the year-ago reported number.
Key Picks
A few better-ranked stocks from the Medical-Products industry include VAREX IMAGING (VREX - Free Report) , Envista Holdings Corporation (NVST - Free Report) and BellRing Brands, Inc. (BRBR - Free Report) .
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Here's Why You Should Retain Haemonetics (HAE) Stock for Now
Haemonetics Corporation (HAE - Free Report) registered a year-over-year increase in revenues on recovery across businesses in the first quarter of fiscal 2022. Strong end-market demand for NexSys PCS system with Persona technology looks encouraging. Expansion of both company-adjusted margins buoys optimism as well. However, sluggish growth in Blood Center business and escalating expenses do not bode well.
Over the past year, the Zacks Rank #3 (Hold) stock has declined 29.4% against 10.8% growth of the industry and a 29.7% rise of the S&P 500.
The renowned medical device company has a market capitalization of $3.20 billion. Its first quarter of fiscal 2022 earnings surpassed the Zacks Consensus Estimate by 6.4%.
Over the past five years, the company registered earnings growth of 7%, ahead of the industry’s 5.8% rise and the S&P 500’s 2.8% increase. The company’s long-term projected growth of 10% compares with the industry’s growth projection of 15.8% and the S&P 500’s expectation of 11.3% growth.
Image Source: Zacks Investment Research
Let’s delve deeper.
Q1 Upsides: Haemonetics exited the first quarter of fiscal 2022 with better-than-expected earnings and revenues. The company-adjusted gross margin was 54.7%, up 750 basis points year over year. The primary drivers of this improvement were the addition of Vascular Closure from the acquisition of Cardiva Medical, Inc. (Cardiva), productivity savings from the Operational Excellence Program, favorable product mix and improved operating efficiency. The recently-acquired VASCADE vascular closure technology exceeded the company’s expectations, with strong revenue growth in the reported quarter.
Recovery Across Businesses: We are encouraged by the impressive fiscal first quarter performance across all operating segments. Plasma collections in Europe showed continued recovery, specifically in Czech Republic and Hungary, driven by fewer COVID-related restrictions and plasma center growth. The company also witnessed growth in the adoption and utilization of TEG disposables and strong instrument placements. Hospital business revenues grew 26% in the quarter, primarily driven by continued improvement in hospital procedures on increased utilization of disposables, strong capital sales in North America, and new business opportunities in Europe. Platelet collections also recovered fully in Japan. The company experienced strong market demand for platelets in China, driven by expansion in Tier 2 markets.
Plasma Franchise Grows: At present, Haemonetics is witnessing plasma market growth above historic rates, driven by an industry striving to double collections by 2025 and the rising demand for plasma-based medicines. North America disposables revenues increased 3% in the fiscal first quarter, driven by improvement in collection volumes. The company registered double-digit growth in plasma software revenues in the quarter, led by recovery in plasma collection volumes and the Donor 360 app. Haemonetics also made significant progress with the Persona technology during the quarter. We are upbeat about strong end-market demand for NexSys PCS system with Persona technology.
Downsides
Sluggish Blood Center Business: The company’s sluggish Blood Center business performance in the first quarter of fiscal 2022 due to pandemic-led business disruptions is concerning. Blood center revenues declined 6% in the fiscal first quarter, led by lower collection volumes and discontinued customer contracts in North America. Further, the company expects a decline of 6-8% in blood center revenues for fiscal 2022.
Escalating Costs and Operating Expenses: The rise in restructuring-related costs is building pressure on the bottom line for Haemonetics. Adjusted operating expenses in the first quarter of fiscal 2022 rose 36.7% year over year. The increase was primarily driven by a rise in variable compensation and the acquisition of Cardiva Medical, an increase in variable compensation and continued investments.
Highly Leveraged Balance Sheet: Haemonetics’ total debt-to-capital ratio of 0.53 for the first quarter of fiscal 2022 stands at a high level, indicating a highly leveraged balance sheet. It represents a significant rise from 0.29 at the end of the fiscal fourth quarter.
Estimate Trend
Over the past 30 days, the Zacks Consensus Estimate for Haemonetics’ earnings has moved down by 0.4% to $2.77.
The Zacks Consensus Estimate for second-quarter fiscal 2022 revenues is pegged at $245.89 million, suggesting a 17.38% rise from the year-ago reported number.
Key Picks
A few better-ranked stocks from the Medical-Products industry include VAREX IMAGING (VREX - Free Report) , Envista Holdings Corporation (NVST - Free Report) and BellRing Brands, Inc. (BRBR - Free Report) .
VAREX, sporting a Zacks Rank #1 (Strong Buy), has a long-term earnings growth rate of 5%. You can see the complete list of today’s Zacks #1 Rank stocks here.
Envista Holdings, with a Zacks Rank #2 (Buy), has a long-term earnings growth rate of 27.4%.
BellRing Brands, carrying a Zacks Rank #2, has a long-term earnings growth rate of 29.1%.