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Haemonetics (HAE) Up 14.6% Since Last Earnings Report: Can It Continue?

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A month has gone by since the last earnings report for Haemonetics (HAE - Free Report) . Shares have added about 14.6% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Haemonetics due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Haemonetics Q2 Earnings Beat Estimates, Margins Down

Haemonetics delivered adjusted earnings per share 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 earnings per share 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.

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 as provided by the company 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.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates flatlined during the past month.

VGM Scores

At this time, Haemonetics has an average Growth Score of C, a grade with the same score on the momentum front. Following the exact same course, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Haemonetics has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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