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Abaxis Tops Q3 Earnings and Revenues, Margins Up Y/Y - Analyst Blog

California-based medical products company, Abaxis, Inc. ( ABAX ) reported second-quarter fiscal 2015 earnings per share of 24 cents, beating the Zacks Consensus Estimate of 22 cents by 2 cents or 9.1%. Earnings in the reported quarter also exceeded the year-ago number of 18 cents by 33.3%.

Abaxis experienced significant improvement in the quarter's earnings owing to strong growth in revenues and operating margin.

Revenues

In the reported quarter, Abaxis delivered revenues of $53.9 million, up 17.6% year over year due to higher sales volumes. The top line also handily beat the Zacks Consensus Estimate of $50 million.

The revenue beat was primarily driven by the impressive performance of Abaxis' veterinary business on account of record unit sales of VetScan VS2 blood analyzers coupled with double digit growth in sales of veterinary reagent disc units.

Segment in Detail

On a geographic-region basis, revenues from North America (accounting for 82.5% of total revenues) were up 19.3% to $44.5 million, while revenues from the international market (representing 17.5%) increased 10.6% to $9.4 million. Sales in Europe grew 12% while the same in Pacific Rim rose 5% year over year.

Abaxis operates in three main segments, namely Veterinary, Medical and Other. In the reported quarter, Veterinary sales comprised 84.5% of total sales; 14.1% was from Medical sales while the remaining 1.4% was from Other.

Veterinary market revenues increased 20.1% year over year to $45.6 million, driven by 39% increase in sales of veterinary disc and 32% rise in veterinary consumable sales.

On the other hand, sales in the Medical market rose 6.1% to $7.6 million, on account of 14% growth in medical disc sales. However, revenues from the other segment remained flat year over year at $0.8 million.

Operational Updates

Based on an encouraging top line, fiscal second-quarter gross profit rose 30% to $28.4 million. Consequently, gross margin expanded 500 basis points (bps) year over year to 52.7%.

Research and development expenses increased 23.8% year over year to $4.2 million, while selling and marketing expenses spiked 15.9% to $11.5 million. General and administrative expenses also rose 33.1% year over year to $3.8 million. Despite rise in overall operating expenses, double digit revenue growth contributed to an expanding operating margin of 16.5%, up 410 bps year over year.

Financial Update

Abaxis exited the quarter with cash, cash equivalents and short- and long-term investments of $126.3 million versus $121.2 million as on Mar 31, 2013.

Abaxis' management paid a quarterly dividend of 10 cents per common share to all its shareholders during the reported quarter.

Our Take

We are impressed with Abaxis' promising second-quarter fiscal 2015 outcome. In the reported quarter, the company signed Patterson as its new distributor, which helped it win a contract of $1.6 million worth of stocking orders.

In the medical market, the company observed an increasing demand for its easy-to-use portable point-of-care blood analyzer useful in treating Ebola patients in the medical centers. We believe this product will generate more demand at time of such outbreaks, positively contributing to the company's overall revenue growth.

Zacks Rank

Currently, Abaxis carries a Zacks Rank #2 (Buy). Some other well-placed medical products stocks that warrant a look are GW Pharmaceuticals plc ( GWPH ), ZELTIQ Aesthetics, Inc. ( ZLTQ ) and Alere Inc. ( ALR ). While GW Pharmaceuticals and ZELTIQ Aesthetics hold a Zacks Rank #1 (Strong Buy), Alere carries a Zacks Rank #2 (Buy).

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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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