(ABAX - Analyst Report
) reported a promising first-quarter fiscal 2015 with earnings per share of 21 cents, beating the Zacks Consensus Estimate by 2 cents or 10.5%. Earnings in the reported quarter also outpaced the year-ago number of 14 cents by a massive 50%. Abaxis experienced significant improvement in the quarter’s earnings on the back of strong revenue growth and robust increase in the operating margin front.
In the reported quarter, Abaxis’ revenues grew 10% year over year to $47.5 million. However, the Zacks Consensus Estimate of $47 million remains almost in line with the company’s revenue number.
Segment in Detail
On a geographic-region basis, revenues from North America (accounting for 80.8% of total revenues) were up 10.6% to $38.3 million, while revenues from the international market (representing 19.2%) increased 7.3% to $9.1 million. Sales in Europe grew 11% to $7.3 million while the same in Pacific Rim declined by 6% year over year to approximately $1.9 million.
Abaxis operates in three main segments, namely Veterinary, Medical and Other. In the reported quarter, Veterinary sales comprised 82.9% of total sales; 15.3% was from Medical sales while the remaining 1.8% was from Other.
Veterinary market revenues increased 8.3% year over year to $39.4 million, while sales in the Medical market rose 20% year over year to $7.2 million. Service revenues from Abaxis Veterinary Reference Laboratories (AVRL) escalated 55% year over year to $3.4 million.
In the reported quarter, total medical and veterinary reagent disc revenues rose 18% to $26.9 million. Moreover, total unit sales of medical and veterinary reagent discs in the first quarter totaled 2.1 million units, up 18% from the year-ago quarter.
However, total medical and veterinary instrument sales declined 12% year over year to $7.6 million in the quarter. On the other hand, total unit sales of medical and veterinary instruments were 1,077 units, down 12% from the prior-year quarter.
Based on an encouraging top line, the fiscal first-quarter gross profit rose 14.3% to $23.9 million. Consequently, gross margin expanded 189 basis points (bps) year over year to 50.3%.
Research and development expenses were $3.9 million, up 24.4%. However, selling and marketing expenses declined 4.5% to $9.6 million. General and administrative expenses also dipped 4.8% year over year to $2.9 million. Operating margin during the quarter expanded 493 bps to 15.7%.
Abaxis exited the quarter with cash, cash equivalents and short- and long-term investments of $125.7 million versus $121.2 million as on Mar 31, 2013.
Abaxis’ management declared a quarterly dividend of 10 cents per common share, which will be paid to all shareholders of record as of the close of the business on Sep 3, 2014. The dividend will be paid to the shareholders on Sep 17, 2014.
We are encouraged with Abaxis’ first-quarter fiscal 2015 outcome. This is particularly significant as the company has been able to overcome its disappointing performance over the last few quarters, characterized by three consecutive earnings estimate misses. According to the company, Abaxis’ new vet contract along with the new VetScan Instruments sales contributed to the impressive revenue growth in North America, which is the largest geographical segment of the company.
Further, management has spoken highly about the two strategic long term agreements Abaxis has signed with VCA Antech. Management is confident that both these agreements will benefit Abaxis and will serve as potential contributors to the company’s increased level of sales in the upcoming years. In the reported quarter, Abaxis’ gross margin has already expanded by a significant amount and at present, the company is involved in improving its sales tools in an attempt to further boost the gross margin. We are also encouraged with the substantial increase in operating margin that improved the quarter’s bottom line.
Currently, Abaxis carries a Zacks Rank #3 (Hold). Some better-placed medical products stocks that are worth a look are Alere Inc. (ALR - Snapshot Report
), Cardiovascular Systems Inc. (CSII - Snapshot Report
) and CareFusion Corporation (CFN - Analyst Report
). All these stocks carry a Zacks Rank #2 (Buy).