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Haemonetics (HAE) Q2 Earnings Beat Estimates, Margins Down

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Haemonetics Corporation (HAE - Free Report) delivered adjusted earnings per share (EPS) of 62 cents in the second quarter of fiscal 2021, reflecting a 28.7% year-over-year decline. The bottom line, however, exceeded the Zacks Consensus Estimate by 24%.

On a GAAP basis, net income was 94 cents per share, up by 30.6% from the year-ago EPS of 72 cents.

Total Revenues

Revenues declined 17.1% (down 15.5% on an organic basis) to $209.5 million in the second quarter of fiscal 2021. However, the top line surpassed the Zacks Consensus Estimate by 3.6%.

The plunge in revenues was primarily due to the negative impact of the pandemic.

Quarterly Revenues by Product Categories

At Plasma, revenues of $78.4 million (accounting for 37.4% of total revenues) decreased 32.4% year over year (down 29.9% on an organic basis) in the reported quarter. Plasma segment’s organic revenue decline in North America was 32.3%, including 33% fall in disposables.

Haemonetics Corporation Price, Consensus and EPS Surprise

Haemonetics Corporation Price, Consensus and EPS Surprise

Haemonetics Corporation price-consensus-eps-surprise-chart | Haemonetics Corporation Quote

Revenues at Blood Center (35.8%) fell 8.6% (down 7.8% on an organic basis) to $74.9 million.

Hospital revenues (24.3%) were up 2.6% (up 2% on an organic basis) to $50.9 million. Under the Hospital segment, organic revenue growth in the Hemostasis Management product line was 4.1% in the second quarter of fiscal 2020, driven by strong U.S. disposable sales.

Service revenues (2.5%) were up 4.6% (up 1.3% on an organic basis) to $5.2 million.

Margins

Per the company, adjusted gross margin was 52.2%, down 40 basis points (bps) year over year on higher operational costs, lower volume and unfavorable product mix. However, this was partially offset by gross productivity savings from the Operational Excellence Program and lower depreciation.

Adjusted operating expenses in the second quarter of fiscal 2021 were $66.4 million, down 11.7% from $75.2 million in the year-ago quarter. The reduction in operating expenses resulted from productivity savings and cost-containment actions taken to offset the negative effects related to COVID-19 which were partially offset by continued investments.

Adjusted operating income was $31.6 million in the quarter under discussion, down 30.1% from $45.2 million in the year-ago quarter. Meanwhile, adjusted operating margin contracted 240 bps year over year to 20.5%.

Financial Position

Haemonetics exited the second quarter of fiscal 2021 with cash and cash equivalents of $279.2 million compared with $275.7 million at the end of first quarter of fiscal 2021. Long-term debt at the end of the second quarter of fiscal 2021 was $297 million, marking a marginal increase from $296.9 million at the end of the first quarter of fiscal 2021.

Cumulative net cash flow from operating activities at the end of fiscal second quarter was $40.9 million compared with $32.5 million a year ago.

Capital expenses incurred by the company were $15.1 million, up from the year-ago $1.9 million. It also reported free cash flow (before restructuring and turnaround costs) of $38.2 million during the same period, which recorded an increase of 23.9% from $30.8 million a year ago.

2021 Guidance

The company is currently unable to ascertain the scope and duration of the pandemic as well as quantify the actual impact and timing of the associated economic recovery. It is currently in the process of assessing the potential scenarios for the economic impact of COVID-19 and the related effect on healthcare in the coming period.

Our Take

Haemonetics exited the second quarter of fiscal 2021 with better-than-expected results. However, the company’s sluggish Plasma and Blood Center businesses due to the pandemic-led business disruptions are concerning. Contraction of both margins due to lower revenues and higher operational costs associated with the pandemic is worrying. The company’s inability to provide guidance for fiscal 2021 raises apprehensions.

The company’s Hospital business was robust along with uptick in Hemostasis Management product line. Gross productivity savings from the Operational Excellence Program and cost-containment actions partially offset the contraction of gross margin, raising optimism. Strong customer end-market demand, along with the receipt of the FDA’s 510(k) clearance for its NexSys PCS system with Persona technology, buoy optimism.

Zacks Rank and Key Picks

Haemonetics currently carries a Zacks Rank #3 (Hold).

Some other better-ranked stocks in the broader medical space are West Pharmaceutical Services, Inc. (WST - Free Report) , Thermo Fisher Scientific Inc. (TMO - Free Report) and Align Technology, Inc. (ALGN - Free Report) .

West Pharmaceutical reported third-quarter 2020 adjusted EPS of $1.15, beating the Zacks Consensus Estimate by 13.9%. Net revenues of $548 million outpaced the consensus estimate by 7.2%. It currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Thermo Fisher, a Zacks Rank #2 company, reported third-quarter 2020 adjusted EPS of $5.63, beating the Zacks Consensus Estimate by 28.8%. Revenues of $8.52 billion outpaced the consensus mark by 10%.

Align Technology reported third-quarter 2020 adjusted EPS of $2.25, surpassing the Zacks Consensus Estimate by a stupendous 281.4%. Net revenues of $734.1 million exceeded the Zacks Consensus Estimate by 38%. It currently flaunts a Zacks Rank #1.

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