We have recently upgraded our recommendation for
), a portable Medical (human) and Veterinary (animal) blood
analysis system developer, to Outperform from Neutral, primarily
based on its strong future growth prospects.
Over the last few quarters, Abaxis has consistently delivered
strong results through balanced sales growth worldwide. In the last
reported quarter, total sales increased a robust 14% year over year
to $42.7 million and EPS rose 40% year over year to 21 cents, both
handsomely ahead of the Zacks Consensus Estimates.
The upside in revenues were primarily attributable to robust
growth in both North America (up 16% to $35.4 million) and in the
international market (up 5% to $7.3 million).
The Veterinary segment of Abaxis contributed 80% to the top line
and is on the ramp up based on its huge product line and improved
direct sales force. It intends to introduce new rapid assay of
products, which would boost Veterinary segment revenue. We are
further impressed with the newly-formed Abaxis Veterinary Reference
Laboratories' ("AVRL") encouraging performance in its second full
quarter and is complimenting well with the growth of the company's
With AVRL in full throttle, requisitions shot up 241%, and the
customer base increased a massive 130% on a sequential basis.
Abaxis is optimistic on its consistent performance in the
veterinary market and expects to keep up with this growth momentum
in the upcoming quarters.
Moreover, we encouragingly note that the company is taking
initiatives to expand in the international medical market. The
recent contract with a leading international biotechnology company
to deliver 300 Piccolo Xpress instruments is a big step in this
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Amidst several ongoing disputes including a patent infringement
) and a US Federal Trade Commission investigation leading to huge
increase in legal expenses, the improvement in margins was
encouraging for the company. We expect gradual resolution of these
issues leading to further expansion in operating margin.
Consequently, we are upbeat about the immense potential of Abaxis
in the human and veterinary diagnostic market.
Our recommendation is in line with the short-term Zacks #1 Rank