) reported its second straight earnings miss on October 22 as
revenue came in below expectations and profit margins contracted.
Analysts revised their estimates meaningfully lower for both 2013
and 2014 after the latest miss, sending the stock to a Zacks Rank
#5 (Strong Sell).
Although shares have fallen after the Q3 report, the stock still
looks pricey at 33x forward earnings. Investors should consider
waiting for earnings momentum to turn around before investing.
Abaxis, Inc. manufactures portable point-of-care blood analysis
systems for use in veterinary and human patient-care settings.
Third Quarter Results
Abaxis reported disappointing Q3 earnings on October 22. Earnings
per share came in at 18 cents, missing the Zacks Consensus Estimate
of 20 cents. Earnings growth was flat compared with the same
quarter last year.
Revenues rose 4% year-over-year to $45.9 million, which was short
of the $48.0 million consensus. Total sales in the veterinary
market were up 8% to $37.9 million.
Despite the increase in revenues, gross profit declined 5% as the
gross margin fell 480 basis points to 47.7% of revenue. Total
operating expenses improved 304 basis points, however, to 35.3% of
revenues. But operating income still fell 9% year-over-year.
Following its second consecutive earnings miss, analysts revised
their estimates meaningfully lower for Abaxis, as you can see in
its 'Price & Consensus' chart:
It is a Zacks Rank #5 (Strong Sell) stock.
Based on consensus estimates, analysts project a 31% decline in EPS
in 2013. But they expect a rebound in earnings in 2014 to $1.18,
corresponding with 39% EPS growth.
Shares of Abaxis are down more than 6% since the Q3 earnings
report. Despite the decline, the valuation picture still does not
look attractive. Shares currently trade at a rich 33x 12-month
forward earnings, well above the industry median of 23x. Its price
to sales ratio of 4.1 is also well above its peers at 2.6.
The Bottom Line
With soft top-line growth, declining profit margins, falling
earnings momentum and premium valuation, investors should wait to
establish a position in Abaxis until its earnings momentum turns
Todd Bunton, CFA is the Growth & Income Stock Strategist
and Editor of the
Income Plus Investor service
ABAXIS INC (ABAX): Free Stock Analysis Report
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