Zacks_Analysts' Blog : Haemonetics Remains Neutral - Analyst Blog

Recently, we reiterated our Neutral recommendation on Haemonetics Corporation (HAE) with a target price of $63.00.

Haemonetics reported an adjusted EPS of 65 cents in the first quarter of fiscal 2012, way below the Zacks Consensus Estimate of 78 cents and the year-ago quarter’s adjusted EPS of 74 cents. The company was impacted by the OrthoPAT devices recall during the quarter.

In addition, high costs were incurred in an effort to substitute plasma HS core product (to collect plasma for transfusion) in certain European countries. These challenges will continue to impact over the remainder of the year, as Haemonetics strives to improve its quality and product portfolio.

The company reported revenues of $170.6 million in the quarter, up 5% compared with the year-ago period. However, revenues were lower than the Zacks Consensus Estimate of $175 million. Revenues from the domestic market increased 8.9% to $86.4 million, while international revenues came down by 0.5% to $84.2 million during the quarter.

Haemonetics remained focused on blood management solutions to provide better services to customers. The company’s web-based blood management portal, IMPACT Online, has witnessed greater acceptance among customers.

Some of the renowned institutions such as John Hopkins Hospital and Engelwood Hospital have decided to implement IMPACT Online. During the reported quarter, the company added 11 new IMPACT accounts, resulting in total of 208.

Haemonetics is currently working on a next-generation surgical blood salvage device, an automated whole blood collection system. The company is progressing with the development of the system, details of which will be available at the end of the current quarter. The company has also allocated resources to its subsidiary, Arryx (acquired in July 2006), for continuing its research in nanotechnology applications in the blood typing and screening field.

The company has witnessed strong potential in the $1.8 billion worldwide blood typing market, which does basic ABO/RH typing, antibody screening and antibody identification. Work on a device demonstrating stability, accuracy and speed of blood typing has been completed and several tests were conducted that met the benchmark of quality and speed without any unexpected issues.

Full study results will be delivered in November 2011. We believe successful development of these initiatives should drive revenues of the company in the long-term.

For the full year, the total impact of product recall and substitution of HS core bowl is estimated to be around $10 million or $0.25 per share. However, the impact from these headwinds could worsen if the company witnesses any further hiccup in its recovery plan. Moreover, Haemonetics operates in a very competitive environment with the presence of players such as Baxter (BAX), Abbott (ABT) among others.