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Abaxis Continues with Balanced Growth Despite AVRL Sale

On Sep 23, we issued an updated research report on Abaxis Inc.ABAX . Abaxis' first-quarter fiscal 2016 results surpassed the Zacks Consensus Estimate on both fronts. Although challenges exist in the form of increasing competition for instrument placements in the vet marketplace, we are hopeful about the company's strong vet consumable business.

We also note that, even post the divestment of its profitable Abaxis Veterinary Reference Laboratories ("AVRL") business, the company continues to deliver solid performance, with balanced growth in its key segments and geographies. Per Abaxis, apart from facilitating focus on its core segments, this divestment will strengthen its co-marketing relationship with Antech.

Eager to end its stint in the reference laboratory market, Abaxis now seeks to concentrate on its advanced point-of-care analyzers which have been enhanced in recent times owing to the company's relationship with Antech. According to Abaxis, Antech's national network of laboratories and a strong technology platform will support superior customer service.

Management is also highly optimistic about the launch of three new rapid tests, Anaplasma and two Feline tests, FIV and FeLV. With these additions, the company currently boasts a full line of rapid tests for its veterinary customers. This has resulted in a mammoth 54% growth in the company's other vet consumable revenues in the first quarter.

Additionally, the company's two recent strategic long-term agreements - a long-term product supply agreement for Veterinary Centers of America's ("VCA") Animal Hospitals; and a co-marketing agreement with VCA's Antech Diagnostic reference laboratories, hold promise.

However, we anticipate foreign exchange headwind to act as a major dampener for Abaxis through fiscal 2016. Moreover, we are concerned that going ahead, a growing proportion of revenues from low-margin offerings may adversely affect the company's margin. Abaxis' dependence on distributors, coupled with a fiercely competitive environment, also adds to our worries.

The stock currently carries a Zacks Rank #3 (Hold).

Key Picks from the Sector

Medical product stocks such as ICU Medical, Inc. ICUI , NuVasive, Inc. NUVA and OraSure Technologies, Inc. OSUR are expected to do well. All the three stocks sport a Zacks Rank #1 (Strong Buy).

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ABAXIS INC (ABAX): Free Stock Analysis Report

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ICU MEDICAL INC (ICUI): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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