On Jun 24, 2013, we reaffirmed our long-term Neutral
). While we are optimistic about the long term potential of the
company, we remain concerned about its vendor dependency and
tough competitive environment. This provider of medical and
veterinary blood analysis systems carries a Zacks Rank #3 (Hold).
Why the Reiteration?
On Apr 25, Abaxis reported fourth-quarter EPS of 30 cents, up
42.8% year over year. The result also beat the Zacks Consensus
Estimate by 3 cents. Although revenues shot up 17% to $50
million, it missed the Zacks Consensus Estimate of $51 million.
On a geographic basis, Abaxis recorded balanced growth as
revenues from the North American market (accounting for 84% of
total revenue) increased 18% while sales in the overseas market
climbed 10% year over year. Robust growth in international
market, even amid challenging conditions in Spain and Italy, was
encouraging. The company also witnessed positive momentum in the
We believe that Abaxis' focus and investment in the North
American and overseas infrastructure should support the current
double-digit growth trend in the future. Low worldwide
penetration also provides for substantial growth opportunities in
the niche market served by the company.
Moreover, Abaxis' solid growth in its mainstay veterinary market
was another upside. Meanwhile, the company's Piccolo placement
remained at an encouraging level.
On the tepid side, gross margin pressure is a looming concern. In
the fourth quarter, Abaxis' gross margin contracted a massive 230
basis points (bps). We remain watchful of the increasing pressure
on gross margin. We are also concerned about the company's vendor
dependency and tough competitive landscape.
The estimate revision trend also reflects bearish sentiments
surrounding the stock. Following the release of the
fourth-quarter results, the Zacks Consensus Estimate for fiscal
2014 declined 6.2% to $1.06 per share. Moreover, the Zacks
Consensus Estimate for fiscal 2015 also decreased (down 10.2% to
Other Stocks to Consider
While we remain on the sidelines for Abaxis, medical sector
stocks such as
), carrying a Zacks Rank #1 (Strong Buy), is likely to do well.
Other medical sector stocks worth a look are
Edwards Lifesciences Corporation
). Both are Zacks Rank #2 (Buy) stocks.
ABAXIS INC (ABAX): Free Stock Analysis Report
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