ABAX Abaxis, Inc. (delisted)

Abaxis Inc. (ABAX) reported fourth-quarter fiscal 2011 EPS of 15 cents, beating the year-ago quarter’s 12 cents but missing the Zacks Consensus Estimate by a penny. For fiscal 2011, the company’s EPS was up 10.3% to 64 cents but missed Zacks Consensus Estimate of 65 cents.

Net sales during the quarter increased 12% year over year to $37.5 million, surpassing the Zacks Consensus Estimate of $36 million. The growth was mainly attributable to an 11% increase in sales to $30.6 million in North America.

Moreover, after a few disappointing quarters, the company witnessed a 14% rise in sales from international market which helped boost the entire growth performance of Abaxis. For the full year, Abaxis witnessed a 15% increase in revenue to $143.7 million, marginally beating the Zacks Consensus Estimate of $143 million.

Within the customer group, Abaxis’s fourth quarter revenues saw a 9.7% increase in the Medical Market to $7.5 million and 14.5% in the Veterinary Market to $28.6 million. However, sales from Other customer group decreased 24.5% year over year to $1.3 million.

Total consumable sales surged 17% year over year to $ 4.0 million. Moreover an increase in instrumental sales which include chemistry analyzers, hematology instruments, VSpro coagulation and specialty analyzers and i-STAT analyzers also contributed to the growth (up 5% year over year).

While medical and veterinary reagent disc sales increased 18% to $22.5 million during the fourth quarter, instrument sales were 5% higher at $$7.8 million.

Gross profit for the quarter increased 8.6% year-over-year to $20.4 million. However, gross margin was down 143 basis points to 54.4% mainly due to an increase of 15.1% in cost of sales.

Operating income of $5.2 million increased 14.1% leading to a 31 basis- point expansion in operating margin to 14.1%. During the quarter, the company witnessed a rise in sales and marketing expenses (4.8% to $9.1 million) and general and administrative costs (21.0% to 3.3 million). However research and development cost dropped 1.2% to $2.6 million.

Abaxis exited the fourth quarter with cash and cash equivalents of $105.7 million compared with $96.5 million at the end of March 2010.

Abaxis intends to penetrate the future point-of-care diagnostic testing market as this will be used in a more integrated  manner by physicians in their everyday operations. The company operates in a niche market of portable medical and veterinary blood analysis systems. One of its competitors is Alere Inc. (ALR).

Low worldwide penetration provides scope for substantial growth in this niche industry. We are encouraged by the company’s strong revenue growth, particularly in the veterinary division.

Presently we are Neutral on Abaxis.

 
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