HAE Beats, Reaffirms 2010 Guidance - Analyst Blog

Haemonetics Corporation (HAE) reported earnings per share (EPS) of 70 cents in the first quarter of fiscal 2011 compared with 69 cents in the year-ago quarter. However, after adjusting for certain one- time items, EPS came in at 74 cents surpassing the Zacks Consensus Estimate by 2 cents.

The company reported revenues of $163 million in the quarter, up 5.8% compared with the year-ago period. However, revenues were lower than the Zacks Consensus Estimate of $168 million. At constant exchange rates (CER), revenue was up 8% annually.

Haemonetics earns about 82% of its revenues from the sale of disposables – plasma disposables, blood bank disposables and hospital disposables. Barring plasma disposables which recorded a year-over-year sales decline of 5% to $55.9 million, blood bank and hospital disposables grew 3.4% ($47.6 million) and 0.7% ($46.1 million).

Apart from the headwind of unfavorable foreign currency movement, revenues during the quarter were affected by the decline in plasma revenues. This decline is highly disappointing since plasma revenues recorded a 10% growth rate during the first quarter of 2010. However, we are pleased to note that Haemonetics expects plasma growth to accelerate and currency issues to moderate throughout the rest of 2011.

Within blood bank disposables, revenues from platelet disposables increased 5.9% ($36.3 million), driven by strong sales in Asia and a recovery in Europe and Latin America. However, revenues from red cell disposables were down 4% ($11.3 million) due to a decline in demand for red cells due to declining demand for blood. Revenues from hospital disposables dipped 6% to $16.4 million.

Subsequent to the announcement of the first quarter results, the company reaffirmed its guidance for 2011. While revenue is expected to grow at 9%−12%, adjusted EPS is expected in the range of $3.15−$3.25.

Haemonetics also announced an agreement with Consorta to provide its Web-based blood management portal “Impact Online” to Consorta's member hospitals. Consorta is a health care resource management and group purchasing organization.

Low worldwide penetration combined with demand outstripping supply makes a positive long-term thesis for investing in the blood processing and supply chain management industry. We believe that Haemonetics is well positioned to tap this under-penetrated market. However, we remain cautious about the company’s exposure to an intensely competitive environment.

We are currently Neutral on the stock.