Abaxis, Inc. (ABAX) reported third-quarter fiscal 2015 earnings per share of 26 cents, beating the Zacks Consensus Estimate by a penny. Earnings in the reported quarter also exceeded the year-ago number by an impressive 85.7%.
The significant improvement in the quarter's earnings was owing to strong growth in revenues coupled with improved margins.
Total Revenue
In the reported quarter, Abaxis delivered revenues of $59.5 million, reflecting a robust improvement of 45.8% year over year owing to record sale of instruments. The top line also comfortably exceeded the Zacks Consensus Estimate of $52 million.
Segment in Detail
On a geographic-region basis, revenues from North America (accounting for 82.4% of total revenue) were up 54.2% to $49 million, while revenues from the international market (representing 17.6%) increased 16.3% to $10.5 million.
Abaxis operates in three main segments, namely Veterinary, Medical and Other. In the reported quarter, Veterinary sales comprised 78.8% of total sales; Medical sales contributed 19.9% while the remaining 1.3% was from Other.
Veterinary market revenues increased 45.5% year over year to $46.9 million, while Medical sales were up 50.9% year over year at $11.8 million. Revenues from the Other segment rose 5% to $0.8 million, while that from Abaxis Veterinary Reference Laboratories (AVRL) escalated 38% year over year to $3.5 million.
In the third quarter, total medical and veterinary reagent disc revenues rose 20% to $26.9 million. Moreover, total unit sales of medical and veterinary reagent discs amounted to 2.1 million units, up 16% from the year-ago quarter.
Also, total medical and veterinary instrument sales increased a massive 136% year over year to $19.2 million in the quarter. On the other hand, total unit sales of medical and veterinary instruments were 2,742 units, up 120% from the prior-year quarter.
Operational Updates
Based on an encouraging top line, the fiscal third-quarter gross profit rose 51% to $29.2 million. Consequently, gross margin expanded 160 basis points (bps) year over year to 49%.
Research and development expenses dropped 0.3% year over year to $3.6 million, while selling and marketing expenses spiked 33.9% to $11.7 million. General and administrative expenses also rose a massive 98% year over year to $4.8 million. Despite rise in overall operating expenses, double-digit revenue growth allowed for an expanding operating margin of 9.2%, up 410 bps year over year.
Financial Update
Abaxis exited the quarter with cash, cash equivalents and short- and long-term investments of $109.3 million versus $102.7 million as on Mar 31, 2014.
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' encouraging third-quarter fiscal 2015 outcome, which exceeded the Zacks Consensus Estimate on both fronts. In the reported quarter, the company signed Henry Schein, Inc. (HSIC) as a new distributor along with two new regional distributors and booked about $4.7 million worth of stocking orders.
In the medical market, the company continued to observe an increasing demand for its easy-to-use portable point-of-care blood analyzer useful in treating Ebola patients at medical centers. In this regard, the company has sold 100s of Piccolo analyzers to these medical centers. We believe this product will witness higher demand at times of such outbreaks, thus positively contributing to the company's overall revenue growth.
Zacks Rank
Currently, Abaxis carries a Zacks Rank #1 (Strong Buy). Other top-ranked medical product stocks include ICU Medical, Inc. (ICUI) and Nxstage Medical, Inc. (NXTM). Both the stocks sport a similar Zacks Rank #1.
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