Haemonetics Banks on Hospital Business, Competition Rife

On Dec 22, we issued an updated research report on Haemonetics Corporation HAE. The stock currently carries a Zacks Rank #3 (Hold).

This leading provider of hematology products and solutions has been trading above the broader industry year to date. The stock has rallied 45.4% compared with the broader industry’s 23.6% gain. The stock has also outperformed the S&P 500’s 20.3% gain. We remained encouraged by the strength in Haemonetics’ Hospital business, where Hemostasis Management has been witnessing strong growth over the past few quarters.

Interestingly, fiscal 2017 growth was evenly split between the TEG 5000 and the TEG 6s, with solid performance in the United States, UK and China.

 

 

Per management, TEG has become the global leader in Hemostasis Management. The TEG 5000 is approved for a broad set of indication in all of its top markets. The TEG 6s and TEG Manager are approved for the same set of indications in Europe, Australia and Japan. In the United States, TEG 6s is indicated for cardiovascular surgery and the company is currently planning to get an approval for a broader set of indications beginning with trauma.

For fiscal 2018, Haemonetics expects the Hospital business to grow majorly on the back of strength in Transfusion Management.

We are also upbeat about Haemonetics’ growth in Plasma franchise. Strong end-market demand for plasma-derived biopharmaceuticals continue to drive the company’s growth. Haemonetics is confident about maintaining growth in the commercial Plasma collection business. The company is also optimistic about strong market adoption of its NexSys PCS plasmapheresis system which recently received the FDA approval.

Further, the raised fiscal 2018 adjusted earnings guidance is also encouraging. Meanwhile, the company’s strong cash position boosts investors’ confidence.

On the flip side, Haemonetics operates in a very competitive environment, both for manual and automated systems, which includes companies like MAK Systems and many others.

Moreover, the company has been witnessing sluggish revenue growth at the Blood Center franchise, significantly affecting its results over the past few quarters. Management also doesn’t expect any early recovery in the Blood Center’s outcomes, which adds to our concerns.

Key Picks

A few better-ranked medical stocks are Bruker Corporation BRKR, Align Technology, Inc. ALGN and Chemed Corporation CHE. While Bruker and Align Technology sport a Zacks Rank #1 (Strong Buy), Chemed carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Bruker has a long-term expected earnings growth rate of 9.9%. The stock has rallied roughly 57.1% over a year.

Align Technology has a long-term expected earnings growth rate of 28.9%. The stock has gained 126.1% in a year.

Chemed has a long-term expected earnings growth rate of 10%. The stock has moved up 50.9% in a year.

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