We recently reiterated our Neutral recommendation on
) based on its dependency on distributors which makes it difficult
to establish a steady distribution network overseas.
The veterinary market is a major contributor to the company's
top-line growth. Abaxis sustained this trend and once again
reported strong results in the quarter (up 19% year over year).
North American veterinary sales were up 17%.
Alongside, the company's new full-service laboratory testing
facility, Abaxis Veterinary Reference Laboratories (AVRL), is
complimenting the growth of the company's veterinary segment. AVRL,
in its second full quarter of operations, generated revenue of
$470,000 (up 258% sequentially). With AVRL in full action,
requisitions surged 241% and the customer base soared 130% on a
Moreover, the company witnessed a consistent increase in Piccolo
placement. During the reported quarter, total revenue from the
medical market remained flat year over year as uncertainty
regarding the future direction of healthcare continued to affect
the market for capital equipment within the physician office.
Notwithstanding this, the US medical team sold 264 Piccolos
(including 10 sold to the government) in the reported quarter, up
52.6% year over year and 49.6% sequentially. With various
core-marketing programs being undertaken, Abaxis expects placement
rates to increase further.
However, we remain apprehensive about Abaxis' dependency on
distributors to sell its products. Abaxis had issues with its
international distributors in the past, which makes it difficult to
establish a steady distribution network overseas. Thus, failure in
successfully developing and maintaining relationships with these
distributors could adversely affect the company's business.
Besides, the presence of many big players like
Idexx Laboratories Inc.
) that are endowed with greater resources on all fronts has made
the human and veterinary diagnostic market highly competitive.
Recap and Outlook
The company reported a strong fourth quarter fiscal 2012 results
with an EPS of 21 cents, up 40% year over year and beating the
Zacks Consensus Estimate of 17 cents.Sales increased 14% year over
year to $42.7 millionand surpassed the Zacks Consensus Estimate of
The year-over year improvement was mainly on the back of
balanced sales growth in both North America and in the
international market. After several quarters of margin pressure,
the gross and operating margins expanded, creating a sense of
comfort for the company.
The company has not provided any outlook for the upcoming
period. However the Zacks Consensus revenues and EPS estimates for
the first quarter of fiscal 2013 remain at $41 million and 17 cents
Abaxis currently retains a Zacks #2 Rank, which translates into
a short-term Buy rating.
ABAXIS INC (ABAX): Free Stock Analysis Report
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IDEXX LABS INC (IDXX): Free Stock Analysis
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