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Haemonetics' (HAE) Q3 Earnings Top Estimates, EPS View Up

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Haemonetics Corporation (HAE - Free Report) reported adjusted earnings per share (EPS) of 62 cents in the third quarter of fiscal 2018, a 44% surge year over year. The bottom line also beat the Zacks Consensus Estimate of 41 cents. The metric was favourably attributed by 10 cents of lower tax rate and 4 cents of currency translation, partly offset by a couple of cents’ dilution on increased share count.

On a reported basis, Haemonetics posted net loss of 12 cents per share compared with earnings of 30 cents in the prior-year quarter. The metric included $12 million of net transition tax on earnings from certain foreign subsidiaries, previously tax deferred. However, the same is partly offset by a $7-million benefit from the revaluation of deferred tax items using the lower corporate tax rates effective Jan 1, 2018.

Total Revenues

Revenues were up 2.7% year over year (up 1.1% at constant exchange rate or CER) to $234 million in the reported quarter. The top line also exceeded the Zacks Consensus Estimate of $227 million. The year-over-year growth was consistently backed by strong results in North America and improving international results in the key markets.

Haemonetics Corporation Price, Consensus and EPS Surprise

Haemonetics Corporation Price, Consensus and EPS Surprise | Haemonetics Corporation Quote

 

Revenues by Product Categories

Haemonetics reports operating results under four business franchises: Plasma, Haemostasis Management, Cell Processing and Blood Center.

At Plasma, reported revenues of $113.1 million (48.3% of total revenues) were up 4.1% year over year (up 5% at CER).

Revenues at BloodCenter (31.8% of total revenues) declined 2.8% (down 5.1% at CER) to $74.2 million.

Hemostasis Management franchise revenues (8.5% of total revenues) rose 17.6% (up 15.7% at CER) to $19.9 million. Revenues from Cell Processing were up 3.5% (up 0.6% at CER) to $26.8 million (11.5% of total revenues).

Margins

Haemonetics’ third-quarter adjusted gross margin was 47.6%, up 310 basis points (bps) year over year, driven by favorable mix, productivity and currency.

Adjusted operating income was $41.8 million in the quarter, a 20.5% rally year over year. Adjusted operating margin expanded 270 bps year over year to 17.9% in the quarter under review. Favourable foreign currency translation contributed about 100 basis points to year-over-year operating margin improvement.

Financial Position

Haemonetics exited the third quarter of fiscal 2018 with cash and cash equivalents of $252 million compared with $203.6 million at the end of the preceding year. The company generated operating cash flow of $163 million year to date. Adjusted free cash flow (before transformation and restructuring costs) was $113.4 million this quarter, a 33% increase from the year-ago period.

Fiscal 2018 Guidance

Haemonetics revised its fiscal 2018 revenue guidance. The company expects full-year revenues to be in line with fiscal 2017 revenues (excludes currency impact of over 50 bps). The view for Plasma revenue growth has been raised to 5% from the 3-5% range, projected earlier. The outlook for hospital revenue rise has been updated to 6% from the earlier expectation of 7-10%. Blood Center revenues are likely to decline in the 6-7% range (the previous guidance was a decrease of 7-10%). The Zacks Consensus Estimate for 2018 revenues is pegged at $892.1 million.

The company raised its 2018 adjusted EPS guidance to $1.80-$1.90 from the previous band of $1.65-$1.75. The Zacks Consensus Estimate of $1.69 remains below the guided range.

Our Take

Haemonetics exited third-quarter fiscal 2018 on a promising note with both earnings and revenues beating the Zacks Consensus Estimate. Continued momentum in new business generation and geographical expansions have helped the company deliver strong results of late. However, we are disappointed with the company’s sluggish Blood Center business moderating its overall growth this reporting cycle despite encouraging progress noticed in the Plasma and Hospitals.

The company’s strong cash position boosts investors’ confidence. The increased fiscal 2018 adjusted earnings guidance is also impressive.

Zacks Rank & Key Picks

Haemonetics has a Zacks Rank #3 (Hold). A few better-ranked stocks having reported solid results this earnings season are PetMed Express (PETS - Free Report) , PerkinElmer (PKI - Free Report) and ResMed (RMD - Free Report) . While PetMed sports a Zacks Rank #1 (Strong Buy), PerkinElmer and ResMed carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

PetMed recently reported third-quarter fiscal 2018 results. Adjusted earnings per share of 44 cents were up 88.3% from the prior-year quarter. Revenues rose 13.7% on a year-over-year basis to $60.1 million.

PerkinElmer reported fourth-quarter 2017 adjusted earnings per share of 97 cents. Adjusted revenues were approximately $641.6 million, up from $567 million in the year-ago quarter.

ResMed posted second-quarter fiscal 2018 adjusted earnings per share of $1, up 36.9% from the prior-year quarter. Revenues increased 13.4% year over year (up 11% at constant exchange rate or CER) to $601.3 million.

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