On Dec 7, 2015, we issued an updated research report on Massachusetts-based Haemonetics Corporation HAE, a provider of blood management solutions to blood and plasma collectors, hospitals and health care providers globally.
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 the first half of fiscal 2016, the company generated $8 million in revenues in Russia, down $6 million or 45% on a year-over-year basis.
At the end of the first quarter of fiscal 2016, the company witnessed signs of improvement in the Russian economy, specifically on strengthening oil and ruble valuations. However, to management’s disappointment, those positive macro trends fizzled out soon. In consideration of the ongoing economic and political uncertainty in the region, Haemonetics has lowered its fiscal 2016 forecast by about $5 million. Further, the loss of the American Red Cross Order and a tough competitive environment continue to weigh on the stock.
Accordingly, the company delivered a mixed second-quarter fiscal 2016 with earnings beating the Zacks Consensus Estimate, while revenues missed the same.
On a brighter note, we are encouraged to note that, despite difficult market conditions, Haemonetics is working 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 company’s surgical business remains stable while the software business is expanding, reflecting 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 increases 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 the Japanese platelet market), Haemonetics has entered into a contract that provides scope for meaningful market share gain in the traditional single dose collection modality in Japan.
Accordingly, the company’s fiscal 2016 forecast anticipates some acceleration in utilization through its second half. For the full fiscal, 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 GW Pharmaceuticals plc GWPH, ICU Medical, Inc. ICUI and INSYS Therapeutics, Inc. INSY. All the three stocks sport a Zacks Rank #1 (Strong Buy).
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