Haemonetics (HAE) Q1 Earnings Beat Estimates, Margins Down

Haemonetics Corporation HAE delivered adjusted earnings per share (EPS) of 46 cents in the first quarter of fiscal 2021, reflecting a 43.2% year-over-year decline. The bottom line, however, exceeded the Zacks Consensus Estimate by 12.2%.

On a GAAP basis, net income was 21 cents per share, improving from the year-ago loss per share of 17 cents.

Total Revenues

Revenues declined 18% (down 15.6% on an organic basis) to $195.6 million in the first quarter of fiscal 2021. However, the top line surpassed the Zacks Consensus Estimate by 1.4%.

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

Haemonetics Corporation Price, Consensus and EPS Surprise

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

Quarterly Revenues by Product Categories

At Plasma, revenues of $68.2 million (accounting for 34.9% of total revenues) decreased 38.2% year over year (down 34.8% on an organic basis) in the reported quarter. Plasma revenue decline in North America was 35.8%, including 33.9% fall in disposables.

Revenues at Blood Center (39.8%) rose 2.6% (up 1.7% on an organic basis) to $77.8 million.

Hospital revenues (22.9%) were down 6% (down 3.9% on an organic basis) to $44.8 million. Under the Hospital segment, organic revenue growth in the Hemostasis Management product line was 2.2% in the first quarter of fiscal 2020 driven by increased equipment sales.

Service revenues (2.4%) were up 4.6% (up 4.5% on an organic basis) to $4.7 million.

Margins

Per the company, adjusted gross margin was 47.2%, down 400 basis points (bps) year over year on lower revenue and higher operational costs related to COVID-19. However, this was partially offset by gross productivity savings from the Operational Excellence Program and cost-containment actions.

Adjusted operating expenses as provided by the company in the first quarter of fiscal 2021 were $63.7 million, down 10.9% from $71.5 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 $28.5 million in the quarter under discussion, down 44.5% from $51.4 million in the year-ago quarter. Meanwhile, adjusted operating margin contracted 680 bps year over year to 14.6%.

Financial Position

Haemonetics exited the first quarter of fiscal 2021 with cash and cash equivalents of $275.7 million compared with $137.3 million at the end of fiscal 2020. Long-term debt at the end of the first quarter of fiscal 2021 was $296.9 million, marking a reduction of 2.8% from $305.5 million at the end of fiscal 2020.

At the end of the first quarter of fiscal 2021, net cash flow from operating activities was $11.8 million compared with $2.6 million in the year-ago period (up 349.5%).

Capital expenses incurred by the company was $7.3 million, down from the year-ago $7.9 million. It also reported free cash flow (before restructuring and turnaround costs) of $10.9 million during the same period, which recorded an increase of 106.7% from $5.3 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. The company intends to issue its full-year guidance later in the fiscal year.

Our Take

Haemonetics exited the first quarter of fiscal 2021 with better-than-expected results. However, the company’s sluggish Plasma and Hospital 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 Blood Center 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. The acquisition of enicor GmbH (on Apr 1) augments the Haemonetics’ portfolio of hemostasis analyzers within the Hospital business unit.

Zacks Rank and Stocks to Consider

Haemonetics currently carries a Zacks Rank #4 (Sell).

Some better-ranked stocks in the broader medical space are West Pharmaceutical Services, Inc. WST, Thermo Fisher Scientific Inc. TMO and Hologic, Inc. HOLX.

West Pharmaceutical reported second-quarter 2020 adjusted EPS of $1.25, beating the Zacks Consensus Estimate by 37.4%. Net revenues of $527.2 million outpaced the consensus estimate by 6.9%. It currently flaunts a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Thermo Fisher, a Zacks Rank #2 (Buy) company, reported second-quarter 2020 adjusted EPS of $3.89, beating the Zacks Consensus Estimate by 45.7%. Revenues of $6.92 billion outpaced the consensus mark by 0.1%.

Hologic reported reported third-quarter fiscal 2020 adjusted EPS of 75 cents, surpassing the Zacks Consensus Estimate by a stupendous 108.3%. Net revenues of $822.9 million exceeded the Zacks Consensus Estimate by 37.1%. It currently sports a Zacks Rank #1.

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