) reported adjusted earnings of 61 cents per share in the third
quarter of fiscal 2014, which increased 5.2% from the year-ago
level but were in line with the Zacks Consensus Estimate.
Adjustments include certain one-time items such as
transformation, integration, and deal amortization expenses,
totaling $24.9 million. On a reported basis, HAE' net earnings
per share were 31 cents, up 63.2% from the year-ago earnings of
Revenues decreased 2.1% year over year (down 0.40% at constant
exchange rate or CER) to $242.1 million and lagged the Zacks
Consensus Estimate of $245 million. After taking into account the
whole blood business from
), the quarterly organic revenues increased 1% year over year (up
4% at CER).
Revenues from the U.S. increased 1.1% to $126.8 million.
However, revenues from international markets declined 5.5% to
$115.4 million. Barring Europe and Japan, where organic revenues
declined 7% and 16% year over year, respectively, growth was
recorded across other regions, namely Asia (12%) and North
Revenues by Product Categories
product category (86.4% of revenues), comprising of Plasma, Blood
center and Hospital Disposables, Haemonetics reported revenues of
$209.1 million, down 1.7% from the year ago quarter. This decline
is attributable to the weak performance of Blood center
disposables and the Hospital Disposables. However, Russia and
China were the major revenue drivers in the Disposables
Revenues from Blood center disposables went down 10% while
revenues from Hospital Disposables declined 3% from the prior
year. The weakness in the U.S. blood collection market and loss
of a European tender were the major reasons for
lower-than-expected revenues in the Blood center disposables
The weak Hospital Disposables revenues is mainly attributable
to the 11.1% fall in Surgical disposables revenues, due to the
return of a competitor whose production operations were limited
by a natural disaster in the prior year. Moreover, OrthoPAT
(orthopedic perioperative autotransfusion system) revenues were
also down 9.8% year over year. The continuing market shift toward
lower transfusion triggers was a major headwind. Another reason
behind this decline was increased use of tranexamic acid for
treatment and prevention of post-operative blood loss.
(7.3% of revenues) revenues were $17.6 million for the quarter,
up 10% year over year. Moreover, with BloodTrack and other blood
management software in the pipeline, the company seems to be
prepared to exploit the market opportunities in the future.
Equipment and Other
(6.4% of revenues) revenues were $15.4 million for the quarter,
down 17.9% year over year. The timing of tenders and tight
capital budgets are responsible for this decline in revenues.
HAE reported a 0.32% decline in adjusted gross profit to
$124.2 million accompanied by a 90 basis points (bps) expansion
in adjusted gross margin to 51.3% during the quarter. The
improvement in gross margin can be attributed to cost
efficiencies developed through implementation of certain
Adjusted operating expenses were up 5.3% to $81.7 million.
This escalation in cost was due to increase in promotional
investments in emerging markets and planned research &
development expenses. Consequently, adjusted operating profit
declined 9.38% to $42.5 million and adjusted operating margin
declined 150 bps to 17.5%.
Haemonetics exited the fiscal third quarter with cash and cash
equivalents of $177.8 million compared with $159.1 million as of
Sep 28, 2013 and with $179.1 million as of Mar 30, 2013. The long
term debt of the company declined 11.05% to $406.4 million.
HAE generated $45.3 million in cash flow from operations,
reflecting strong underlying earnings and effective working
capital management. After making net investments of $16 million
in capital expenditures and before funding $30 million of cash,
restructuring and transformation costs, and $4 million of VCC
capital expenditures, Haemonetics generated $47 million of free
cash flow before transformation costs in the third quarter of
HAE provided an update on its fiscal 2014 outlook. The company
now expects adjusted EPS for the fiscal year to meet the lower
end of its range given in the prior guidance. Previously,
Haemonetics had expected adjusted EPS in the range of
$2.30-$2.40, implying annualized growth of 15-20%. In addition,
total revenue for the year is expected to increase in the
previously stated range of 7-10% on a year-over-year basis. For
fiscal 2014, organic revenues are expected to grow in the range
of 2-4% at CER (earlier 3-5%).
HAE expects its plasma business revenues to grow in the range
of 8-10% in fiscal 2014 (earlier 7-9%). Blood center revenues are
likely to decline 5-8% on an organic basis (earlier
3-5%). Hospital products are expected to decline 0-4%
(earlier grow 0-3%) while Software Solutions are likely to grow
2-5% (earlier 5-7%).
Haemonetics expects adjusted gross margin of 51% (earlier 52%)
with adjusted operating income of $168−$172 million (earlier
$176−$183 million). In addition, free cash flow is expected at
$120 million (earlier $125 million).
HAE reported a disappointing quarter with earnings just on par
with the Zacks Consensus Estimate and revenues missing the
benchmark. Hospital disposable business remains a cause of
concern for the company. The global downturn and a tough
competitive landscape continue to pose threats for Haemonetics
On a brighter side, the products of the company are steadily
gaining momentum. With a strong cash balance and potential
opportunities evolving from emerging markets, the company has
good growth prospects.
HAE completed multi-year extensions of its comprehensive
equipment and disposables supply agreements with certain plasma
collection customers. We believe that low global penetration and
positive demand dynamics provide an encouraging long-term thesis
for investing in the blood processing and supply chain management
Haemonetics holds a Zacks Rank #4 (Sell). However, some
better-ranked companies like
Mead Johnson Nutrition Company
) are expected to do well in the health care industry. While
NuVasive sports a Zacks Rank #1 (Strong Buy), Mead Johnson
carries a Zacks Rank #2 (Buy).
HAEMONETICS CP (HAE): Free Stock Analysis
MEAD JOHNSON NU (MJN): Free Stock Analysis
NUVASIVE INC (NUVA): Free Stock Analysis
PALL CORP (PLL): Free Stock Analysis Report
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