Mixed 2Q for Abaxis - Analyst Blog
26 10월 2012 - 8:00PM
Zacks
Abaxis Inc. (ABAX)
reported earnings per share (“EPS) of 58 cents in the second
quarter of fiscal 2013. However, after taking into account a net
gain related to the legal settlement with Cepheid
(CPHD), adjusted EPS for the quarter came in at 18 cents, in line
with the Zacks Consensus Estimate and 3 cents above the year-ago
earnings.
Revenues during the quarter
increased 11% year over year to $44.3 million, nominally missing
the Zacks Consensus Estimate of $45 million. The growth was based
on higher sales in both North America (up 12% to $36 million) and
in the international market (up 4% to $8.3 million).
Within the customer group,
Veterinary market revenues witnessed an upside of 11% in the
reported quarter to $34.9 million, while Medical Market sales
delivered 7% year-over-year growth to $7.9 million. However, sales
from the Other customer group declined 26.3% year over year to $1.4
million. Excluding sales to the U.S. government, worldwide Medical
sales escalated 17% year over year to $7.4 million.
Total consumable sales were flat
year over year at $29.4 million while instrumental sales increased
by 33% to $11.6 million. Sales from medical and veterinary reagent
discs were down 4% to $22.0 million. Total medical and veterinary
instrument unit sales were up 28% year over year to 1,567 units. In
the medical market, excluding sales to the U.S. government, Piccolo
unit sales were up 86%, and in the veterinary market, the sale of
veterinary units increased 24% year over year. Moreover, service
revenue from Abaxis Veterinary Reference Laboratories (“AVRL”)
maintained its growth momentum and recorded sales of $1.1 million,
up 26% year over year.
Although gross profit in the
quarter increased 5% year over year to $23.1 million, gross margin
contracted 277 basis points (bps) to 52.24%. The company recorded
higher research and development (up 19.04% to $3.6 million), sales
and marketing (up 23.2% to $11.5 million) and general and
administrative expenses (up 2.8% to $4.6 million) during the
quarter. Consequently, operating income declined 34.4% to $3.4
million, leading to a 520 bps contraction in adjusted operating
margin to 7.7%.
Abaxis exited the first quarter
with cash and cash equivalents and short-term investments of $78.9
million, up from $67.5 million at fiscal 2012 end.
Lawsuit with Cepheid
Over
In September 2012, Abaxis reached a
settlement with Cepheid regarding several patents related to
reagent and chemical compositions and processes. According to
the settlement, Cepheid agreed to pay $17.3 million to
Abaxis.
Our Take
Abaxis operates in a niche market
of portable medical and veterinary blood analysis systems. Low
worldwide penetration provides the scope for substantial growth in
this niche industry. Additionally, we are optimistic about AVRL’s
encouraging performance that completed a full year, supporting the
growth of the company’s veterinary segment.
Moreover, we are also optimistic
about the company’s recently formed definitive distribution
relationship with MWI Veterinary Supply, Inc.
(MWIV), a worldwide distributor of animal health products. Per the
deal, effective January, 2013, MWI Vet, as a business partner of
Abaxis, will be able to store, market and promote the entire
veterinary product line of Abaxis in the U.S.
We believe that this is a large
market with high potential for growth. An increase in the number of
households with pets, enhanced human-animal bonding, aging pet
population, more focus on animal health or preventive care and
advancements in pharmaceuticals and diagnostic testing would result
in increased spending, which in turn would be favorable for
the company. However, the competitive landscape is tough with the
presence of big players like Alere (ALR) in the
human and veterinary diagnostic market.
Currently, Abaxis carries a Zacks
#3 Rank (short-term ‘Hold’ rating). Over the long term, we maintain
our ‘Neutral’ recommendation on the stock.
ABAXIS INC (ABAX): Free Stock Analysis Report
ALERE INC (ALR): Free Stock Analysis Report
CEPHEID INC (CPHD): Free Stock Analysis Report
MWI VET SUPPLY (MWIV): Free Stock Analysis Report
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Abaxis, Inc. (delisted) (NASDAQ:ABAX)
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Abaxis, Inc. (delisted) (NASDAQ:ABAX)
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