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Haemonetics (HAE) Gains on Procedure Recovery Amid Cost Woes

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Haemonetics Corporation (HAE - Free Report) has been gaining strength in its Hospital business. A rebound in plasma collection is an added positive. However, mounting operating expenses and soft Blood Center sales do not bode well for the company. Currently, Haemonetics carries a Zacks Rank #3 (Hold).

Over the past six months, Haemonetics has outperformed its industry. The stock has gained 11.9% against the industry's 25.2% fall.

Haemonetics ended the fourth quarter of fiscal 2022 with better-than-expected earnings and revenues. During the quarter, the company registered year-over-year growth in revenues driven by recovery across businesses. The robust performance in the Hospital business on continued strength in the Hemostasis Management product line buoys optimism. Strong customer end-market demand for NexSys PCS system with Persona technology is encouraging. An increase in short-term cash level appears promising.

The expansion of the gross margin is an added advantage. The company-adjusted gross margin was 53.6%, up 360 basis points (bps) year over year. The primary drivers of this improvement were the acquisition of the Vascular Closure business and price and productivity savings from the Operational Excellence Program.

Haemonetics Corporation Price

The fiscal fourth quarter saw an encouraging performance by Haemonetics’ businesses, backed by strong procedure recovery in the hospital business, the resilience of blood donors in blood centers, and rollouts of Persona technology and NexSys. The hospital business revenues grew 19% in the quarter, primarily driven by a continued rebound in procedures amid challenges posed by hospital staffing shortages and supply-chain disruptions in the Asia Pacific. Plasma collections also continued to recover during the quarter. The company anticipates strong demand for plasma-derived therapies and capital investments by customers to contribute to the ongoing rebound in plasma collections as the effects of the pandemic fade.

On the flip side, Haemonetics’ sluggish performance in the Blood Center business in the fourth quarter of fiscal 2022 due to the pandemic-led business disruptions is concerning. Blood Center revenues declined 0.9% in the fiscal fourth quarter. Moreover, whole Blood revenues declined 3% due to blood center staffing shortages and previously discontinued customer contracts in North America. In 2023, the company expects Blood Center revenues to decline 4% to 7%.

Adjusted operating expenses in the fiscal fourth quarter were up 16.4% from the year-ago quarter. This increase was primarily due to the acquisition of the Vascular Closure business and an increase in freight costs. Adjusted operating margin was 17.6%, down 410 bps from the year-ago quarter.

Economic uncertainty and stiff competition remain concerns. The company continues to be challenged by inflationary pressure in the global manufacturing and supply chain, including freight and raw material costs, previous divestitures and price adjustments.

Key Picks

A few better-ranked stocks in the broader medical space are Alkermes plc (ALKS - Free Report) , UnitedHealth Group Incorporated (UNH - Free Report) , Medpace Holdings, Inc. (MEDP - Free Report) .

Alkermes reported first-quarter 2022 adjusted EPS of 12 cents, which surpassed the Zacks Consensus Estimate of a penny. Revenues of $278.6 million outpaced the Zacks Consensus Estimate by 6.2%. It currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Alkermes has an estimated long-term growth rate of 25.1%. ALKS’ earnings surpassed estimates in the trailing four quarters, the average surprise being 350.5%

UnitedHealth, having a Zacks Rank #2 (Buy), reported first-quarter 2022 earnings per share (EPS) of $5.49, which beat the Zacks Consensus Estimate by 1.7%. Revenues of $80.1 billion outpaced the consensus mark by 14.2%.

UnitedHealth has an estimated long-term growth rate of 14.8%. UNH’s earnings surpassed estimates in the trailing four quarters, the average surprise being 3.7%.

Medpace reported first-quarter 2022 adjusted EPS of $1.69, which surpassed the Zacks Consensus Estimate by 34.1%. Revenues of $330.9 million outpaced the Zacks Consensus Estimate by 1.1%. It currently has a Zacks Rank #2.

Medpace has a historical growth rate of 27.3%. MEDP’s earnings surpassed estimates in the trailing four quarters, the average surprise being 17.1%.