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Haemonetics' Plasma Group Strong, Blood Center Group a Drag

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On Apr 11, we issued an updated research report on Braintree, MA-based Haemonetics Corporation (HAE - Free Report) , a leading provider of blood management solutions to customers encompassing blood and plasma collectors, hospitals and health care providers globally.

Haemonetics has been witnessing strong growth in Plasma franchise for quite some time now. Management has maintained high confidence in the continued growth of its commercial plasma collection business. Of late, management declared that its NextGen plasma collection software has been seeing strong customer interest.

Management recently adopted a strategic restructuring initiative, which consists of three phases: Stabilize, transform and accelerate growth. Management believes that the company is almost done with Phase I and expects to start with Phase II in the second half of fiscal 2017. The company plans to transform itself by right-sizing operations and focusing on organic growth along with smaller, tuck-in acquisitions to augment its portfolio. Phase III is slated to begin in fiscal 2019 or beyond wherein management expects to significantly accelerate growth.

The company’s Hospital business is also progressing well. The TEG line of products has gained popularity worldwide. The TEG 5000 is approved for a broad set of indications in all of its top markets. The TEG 6s and TEG Manager are approved for the same set of indications in Europe, Australia and Japan. In the U.S., TEG 6s is to be used for cardiovascular surgery and the company is presently pursuing a broader set of indications, beginning with trauma.

On the flip side, Haemonetics traded below the Zacks categorized Medical - Products industry in the past three months. Per the latest share price movement, the stock gained 1.1% compared to the broader industry's 5.4%. Even the valuation of the stock looks stretched in terms of price-to-earnings ratio (P/E - F12M) when compared to its own industry. The stock currently trades at a P/E ratio of 25.9, compared with 20.5 for the broader industry.

The company has been witnessing sluggish revenue growth at its Blood center franchise. This significantly affected Haemonetics’ results over the past few quarters. Management also doesn’t expect any recovery in the Blood center’s results any time soon.

Macroeconomic uncertainty continues to pose a challenge for Haemonetics. Management also anticipates slower-than-expected product adoption by customers to reduce revenues and profits. Further, currency fluctuations and stiff competition continue to plague the stock.

Zacks Rank & Key Picks

Haemonetics currently has a Zacks Rank #3 (Hold). Better-ranked stocks in the broader Medical space include Inogen, Inc. (INGN - Free Report) , ZELTIQ Aesthetics, Inc. and Hill-Rom Holdings, Inc. . While Inogen sports a Zacks Rank #1 (Strong Buy), ZELTIQ Aesthetics and Hill-Rom carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Inogen gained 52.9% in the last one year, compared with the S&P 500’s gain of 13%. The company reported a stellar four-quarter positive average earnings surprise of over 49.08%.

ZELTIQ Aesthetics surged 85.9% in the last one year, compared with the S&P 500’s gain. Its four-quarter average earnings surprise was a positive of 28.75%.

Hill-Rom gained over 33.9% in the past one year, better than the S&P 500 mark. It posted a trailing four-quarter positive average earnings surprise of 12.03%.

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