Why Is Haemonetics (HAE) Down 8.4% Since Last Earnings Report?

A month has gone by since the last earnings report for Haemonetics (HAE). Shares have lost about 8.4% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Haemonetics due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Haemonetics Q3 Earnings & Revenues Beat

Haemonetics Corporation delivered adjusted earnings per share of 94 cents in the third quarter of fiscal 2020, reflecting 49.2% year-over-year growth. The bottom line also surpassed the Zacks Consensus Estimate by 23.7%.

On a GAAP (reported) basis, net income was 58 cents per share, up 65.7% from the year-ago figure.

Total Revenues

Revenues rose 4.7% (up 8.2% on an organic basis) to $258.9 million from the third quarter of fiscal 2019. Further, the top line surpassed the Zacks Consensus Estimate by 2.3%.

The company continued to benefit from the NexSys device and NexLynk DMS donor management software backed by increased customer adoptions.

Revenues by Product Categories

At Plasma, revenues of $120.4 million (accounting for 46.5% of total revenues) increased 6.9% year over year (up 12.9% on an organic basis) in the reported quarter. Plasma revenue growth in North America was 13.3%, including 9.5% growth in disposables.

Revenues at Blood Center (32.2%) rose 0.7% (up 0.6% on an organic basis) to $83.4 million.

Hospital revenues (19.4%) were up 6.4% (11.4% on an organic basis) to $50.3 million. Under the Hospital segment, organic revenue growth in the Hemostasis Management product line was 19.8% in the third quarter of fiscal 2020.

Margins

Per the company, adjusted gross margin was 52.1%, up 480 basis points (bps) year over year due to change in the pricing structure, favorable product mix and productivity savings.

Adjusted operating income was $61.6 million in the quarter under discussion, up 44.3% from $42.7 million in the year-ago quarter. Meanwhile, adjusted operating margin expanded 650 bps year over year to 23.8%.

Financial Position

Haemonetics exited the third quarter of fiscal 2020 with cash and cash equivalents of $126.4 million compared with $112 million at the end of the second quarter. Long-term debt at the end of the fiscal third quarter was $309.7 million, marking a reduction of 1.4% from $313.9 million at the end of second quarter.

Cumulative cash flow from operating activities was $111.8 million at the end of the third quarter compared with $138.6 million in the year-ago period (down 19.4%). It also reported free cash flow (before restructuring and turnaround costs) of $95.2 million during the same period, which was up 65.5% from $57.5 million a year ago.

Fiscal 2020 Guidance

Haemonetics reaffirmed its reported revenue guidance for fiscal 2020 within the band of 3-5%. The company reiterated yearly organic revenue growth at 6-8%. The Zacks Consensus Estimate for fiscal 2020 revenues is pegged at $1 billion.

Coming to segmental revenues, on an organic basis, the view for Plasma revenue growth remained at 13-15%. Plasma revenue guidance includes 14-16% organic growth in North America.

Hospital revenue growth projection is maintained at 11-13%.

Blood Center revenues are once again projected to decline 4-6% from the year-earlier number.

However, the company raised its 2020 adjusted earnings per share guidance to $3.30-$3.40 (up from $3.10-$3.20 mentioned earlier). The consensus estimate for the metric is pegged at $3.16.

How Have Estimates Been Moving Since Then?

Estimates review followed a flat path over the past two months.

VGM Scores

Currently, Haemonetics has a great Growth Score of A, a grade with the same score on the momentum front. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Haemonetics has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.