Haemonetics Upgraded to Buy

We are moving our recommendation on Haemonetics Corp. (HAE - Analyst Report) to BUY based upon the continued strong performance seen in blood collection and processing market, the company's strong balance sheet and cash flow positions, and consistent performance. This adds up to good earnings quality.

During the last quarter, sales grew 15.5%, net margin was steady in the 10% range, and management increased its FY09 revenue guidance.

We look for this strong growth to be bolstered by new product introductions, which were pushed into fiscal 2009. Management tightened its FY2009 EPS guidance, increasing the lower end.

At the current price, the stock trades at a P/S multiple of approximately 2.2x fiscal 2010, inline with the average P/S of comparables and industry mean. We think that the stock has a potential to trade at 20% premium, yielding a P/S multiple of 2.4x and resulting target price of $64.50.

We note that this stock has weathered the recent financial crisis nicely, and we believe investors will benefit by adding HAE shares to their portfolios.