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Abaxis Poised on Balanced Growth and Test Menu Expansion

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On Dec 18, 2015, we issued an updated research report on Abaxis Inc.ABAX . We anticipate foreign exchange headwind to act as a major dampener for Abaxis through fiscal 2015.

Abaxis delivered a mixed financial performance in the second quarter of fiscal 2016, wherein the bottom line exceeded the Zacks Consensus Estimate but the top line failed to meet the same. On a brighter note, Abaxis managed to deliver double-digit growth in its overall business at CER.

In the veterinary business, management has been 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 and expects to ramp up its market share soon, banking on these tests. During the fiscal second quarter, Abaxis, for the first time, offered its Anaplasma and Feline tests. This partly led to 8% growth in the company's vet consumable revenues in the quarter. We believe these test offerings will increase Abaxis' market share further in the near future.

Management is also optimistic about Abaxis' piccolo placement. According to them, given the current run-rate of disc utilization in the U.S., by the end of 2015, over 2.5 million patients will have been monitored, diagnosed or treated using Abaxis' Piccolo blood chemistry analyzer. Abaxis is thus optimistic about improved sales, going forward.

Abaxis is diligently working on expansion of its distribution network to significantly improve its potential to gain new customers. We believe successful expansion of the product portfolio will boost Abaxis' top line and help penetrate new regions, going ahead.

On the flip side, tough currency headwind in the international market continues to pose challenges affecting Abaxis' overall business by 16% in the reported quarter. Further, we are also concerned about Abaxis' challenges in the course of its transition from a direct sales approach to a distributor model. 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 #2 (Buy).

Key Picks from the Sector

Medical product stocks such as ICU Medical, Inc. ICUI , INSYS Therapeutics, Inc. INSY and Nxstage Medical, Inc. NXTM are also expected to do well. All the three stocks carry a Zacks Rank #1 (Strong Buy).

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ABAXIS INC (ABAX): Free Stock Analysis Report

NXSTAGE MEDICAL (NXTM): Free Stock Analysis Report

ICU MEDICAL INC (ICUI): Free Stock Analysis Report

INSYS THERAP (INSY): 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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