) reported a disappointing third-quarter fiscal 2014 with
earnings per share of 14 cents missing both the Zacks Consensus
Estimate and the year-ago earnings of 22 cents by a massive
Revenues were down 18% to $40.8 million and also lagged the
Zacks Consensus Estimate of $49 million. It generated revenues of
$49.8 million in the prior-year quarter.
Segment in Detail
On a geographic-region basis, revenues from North America
(accounting for 77.9% of total revenues) were down 24% to $31.8
million, while revenues from the international market
(representing the rest) increased 13% to $9.0 million. Sales in
Europe grew 16% to $7.2 million while the same in
increased by 2% year over year.
Abaxis operates in three main segments, namely Veterinary,
Medical and Other. In the reported quarter, vet sales comprised
79% of total sales, 19% were medical sales and 2% were from
Veterinary market revenues shrunk 19.1% year over year to
$32.2 million, while sales in the Medical market declined 12.5%
year over year to roughly $7.9 million. Adjusting for prior-year
quarter's stocking order from
(ABT), worldwide medical sales were up 18%.
Notably, during third-quarter fiscal 2013, Abaxis had two
stocking orders from partners.
(MWIV) ordered about $6 million worth of Abaxis products and
prepared for a Jan 2013 launch. Abbott ordered about $2.3 million
in Abaxis medical products for a launch in the same month. While
Abaxis recorded these sales, none of these products were sold by
the partners to end-users in that quarter.
Based on a disappointing top line, the fiscal third-quarter
gross profit slashed 25.8% to $19.3 million. In terms of basis
points (bps), it contracted a massive 499 bps to 47.3%.
Research and development expenses were $3.6 million, down
5.4%. Selling and Marketing Expenses amounted to $8.7 million,
down 29.6%. General and administrative expenses, however,
increased 8.9% year over year to $2.4 million. Operating margin
during the quarter contracted 411 bps to 11.3%.
Abaxis exited the quarter with cash, cash equivalents and
short- and long-term investments of $101.8 million versus $78.2
million as on Mar 31, 2013.
Abaxis continues to fall short of expectations, as it has
missed the previous three quarterly estimates as well. According
to the company, this weak performance reflects Abaxis' inability
to make a smooth transition from a direct sales approach to a
largely distributor model. This resulted in imbalances in field
inventory and disruptions in field sales organization.
Subsequently, all these had a cascading effect causing
inefficiencies at the factory, leading to higher factory cost and
lower gross margins.
The consistent downfall in margin is a serious cause of
concern as it might have an impact on the bottom-line performance
of the company. Moreover, the company's dependence on the
distributors to sell its products has to be tactfully managed as
smooth long-term relationships with the vendors ultimately ensure
healthy business for the company. Low worldwide penetration rates
and a tough competitive market further lower the confidence of
the investors on the future growth prospects of the company.
Currently, Abaxis carries a Zacks Rank #5 (Strong Sell). Some
better-placed stocks that are worth a look are
Baxter International Inc.
), with a Zacks Rank #2 (Buy).
ABAXIS INC (ABAX): Free Stock Analysis Report
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