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Mixed Q2 at Haemonetics: Tepid View, Russia Weakness

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On Nov 6, 2015, we issued an updated research report on Massachusetts-based Haemonetics CorporationHAE , a provider of blood management solutions to blood and plasma collectors, hospitals and health care providers globally.

Haemonetics delivered a mixed second quarter of fiscal 2016 with earnings beating the Zacks Consensus Estimate, while revenues missed. The year-over-year decline in earnings and revenues added to our disappointment. This was also the primary rationale behind the company significantly lowering its fiscal 2016 financial outlook on Oct 5.

Moreover, since the fourth quarter of fiscal 2015, economic weakness in Russia has been consistently affecting Haemonetics' financial results and growth outlook for fiscal 2016 in the said market. In fact, weakness in its Russian business adversely impacted the company's earnings by 7 cents in fiscal 2015 and this trend is expected to continue through the first half of fiscal 2016. The company is currently working closely with Russian distributors to monitor market conditions and credit risk.

Further, the loss of the American Red Cross Order and a tough competitive environment continue to weigh on the stock.

On a brighter note, we are impressed to note that, even in the face of difficult market conditions, Haemonetics is working hard to improve the performance of its global blood collections business. Plasma, TEG, hemostasis management and China businesses continue to grow at rapid rates. Additionally, the surgical business remains stable while expansion in the software business shows encouraging trends.

Haemonetics' plan for fiscal 2016 still projects significant revenue gains from the new BloodTrackHaemoBank product based on huge market adoption. The company anticipates that BloodTrackHaemoBank, along with SafeTraceTx - its transfusion services software for hospital customers - will generate meaningful upswing in software revenues in the second half of fiscal 2016, delivering 5% to 7% growth at CER in the full year.

Moreover, to address the change in market dynamics in Japan (indication of trend change from single dose to double dose collection techniques in Japanese platelet market), Haemonetics has entered into a contract that provides meaningful market share gains in the traditional single dose collection modality in Japan.

Accordingly, the company's 2016 forecast anticipates some acceleration in utilization through its second half. For fiscal 2016, the company currently expects its Japan revenues to be flat on a year-over-year basis at CER.

Currently, Haemonetics carries a Zacks Rank #5 (Strong Sell).

Key Picks in the Sector

Some better-placed medical products stocks are Hill-Rom Holdings, Inc. HRC , SurModics, Inc. SRDX and Nxstage Medical, Inc. NXTM . All the three stocks sport a Zacks Rank #1 (Strong Buy).

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Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

HAEMONETICS CP (HAE): Free Stock Analysis Report

SURMODICS (SRDX): Free Stock Analysis Report

NXSTAGE MEDICAL (NXTM): Free Stock Analysis Report

HILL-ROM HLDGS (HRC): 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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