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Abaxis (ABAX) Posts In-Line Earnings in Q2, Lags Revenues

Zacks Equity Research

Abaxis, Inc. ABAX reported second-quarter fiscal 2018 adjusted earnings per share of 29 cents, in line with the Zacks Consensus Estimate. However, the adjusted EPS figure declined 42% from the year-ago figure of 50 cents.

Total Revenue

In the fiscal second quarter, Abaxis recorded revenues of $58.9 million, reflecting an increase of 0.5% from a year ago. The top line however missed the Zacks Consensus Estimate of $61 million. According to the company, foreign currency exchange rate fluctuations had a negligible or 0.4% impact on Abaxis’ top line.

Segments in Detail

On a geographic basis, revenues from North America (accounting for 79.7% of total revenue) declined 0.2% to $46.9 million in the reported quarter. Revenues from the international markets (accounting for the rest) improved 3.5% to $11.9 million.

Abaxis operates through three main segments, namely, Veterinary, Medical and Other. In the reported quarter, Veterinary sales accounted for 82.5% of total sales, Medical contributed 15.8% while the remaining 1.8% was generated from Other.

 

ABAXIS, Inc. Price, Consensus and EPS Surprise

 

ABAXIS, Inc. Price, Consensus and EPS Surprise | ABAXIS, Inc. Quote

 

Veterinary market revenues improved 0.5% year over year to $48.5 million, driven by a 3% uptick in veterinary consumable revenues to $39.3 million. Veterinary instrument revenues were down 10% year over year to $7.5 million.

Revenues from the medical market were down from $9.4 million in the same quarter last year to $9.3 million as strength in Piccolo instrument was offset by decline in medical rotors. Also, revenues at the North American medical division totaled $6.8 million, up 1.5% year over year. On a global basis, Abaxis sold 225 Piccolos in the quarter compared with 208 a year ago.

Abaxis exhibited strong consumable growth, up 2% year over year to $46.4 million in the quarter. Within the consumable product lines, total rotor revenues were $31.6 million, almost in line with $31.7 million in the year-ago quarter. On a global basis, Abaxis sold 2.55 million rotor units in the quarter under review, down from 2.57 million units in the year-ago quarter. Hematology reagents and rapid assays drove growth in consumable revenues in the reported quarter.

However, total instruments’ sales decreased 7% to $9.2 million due to lower veterinary instrument sales.

Operational Updates

Fiscal second-quarter’s gross profit dropped 0.3% to $32.2 million. Gross margin contracted 50 basis points (bps) to 54.6%.

Research and development expenses increased 23.8% year over year to $6.1 million and sales and marketing expenses rose 10.9% to $12.5 million. General and administrative expenses however declined 4.3% to $4.2 million. However, the resultant operating income was down 19.7% to $9.4 million in the quarter, while operating margin declined 410 bps to 16%.

Financial Update

Abaxis exited the fiscal second quarter with cash, cash equivalents and short-term investments of $148.8 million, compared with $137.7 million in first-quarter fiscal 2018.

Our Take

Abaxis exited the second quarter of fiscal 2018 on a disappointing with revenues lagging the Zacks Consensus Estimate. Also, a decline in both gross and operating margin is a matter of concern. However, a year-over-year increase in revenues buoys optimism. We are looking forward to improved consumable revenues that boosted veterinary sales performance at Abaxis in the quarter.

Meanwhile, we are encouraged to note that the company is initiating new sales and marketing strategies. In this regard, the company recently started shipping VetScan UA, a hand-held urine chemistry analyzer in September. Moreover, the latest launches of VetScan Phenobarbital Profile and VetScan Canine Pancreatic Lipase Rapid Test buoy optimism. Abaxis plans additional product launches in fiscal 2018, including the VetScan FUSE connectivity system. According to the company, addition of these products will drive growth over the long haul.

Zacks Rank & Key Picks

Currently, Abaxis has a Zacks Rank #3 (Hold).

A few better-ranked stocks in the broader medical sector are PetMed Express, Inc. PETS, Abbott ABT and Intuitive Surgical, Inc. ISRG. Notably, PetMed sports a Zacks Rank #1 (Strong Buy), while Abbott and Intuitive Surgical carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

PetMed reported EPS of 43 cents in the second quarter of fiscal 2018, up 79.2% from the year-ago quarter’s 24 cents. Also, gross margin expanded 548 bps year over year to 35.2% in the reported quarter.

Abbott reported third-quarter 2017 adjusted earnings from continuing operations of 66 cents per share, up 11.9% year over year. Also, third-quarter worldwide sales came in at $6.83 billion, up 28.8% year over year on a reported basis. 

Intuitive Surgical posted adjusted earnings of $2.77 per share in the third quarter of 2017, up 34.5% on a year-over-year basis. Also, revenues increased 18% year over year to $806.1 million.

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