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Abaxis (ABAX) Misses Earnings & Revenue Estimates in Q1

Abaxis, Inc. ABAX – a global provider of point-of-care blood analyzers – reported first-quarter fiscal 2018 adjusted earnings per share of 28 cents, below the Zacks Consensus Estimate of 32 cents. Also, it was also 6.7% below the year-ago figure.

Total Revenue

In the fiscal first quarter, Abaxis recorded revenues of $58.3 million, an increase of $0.56 million or 0.9% 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 0.5% impact on Abaxis’ top line.

Segments in Detail

In the quarter, on a geographic basis, revenues from North America (accounting for 80.6% of total revenue) grew 0.4% to $46.9 million. Revenues from the international markets (accounting for the rest) improved 3.4% to $11.3 million.

Abaxis operates through three main segments, namely, Veterinary, Medical and Other. In the reported quarter, Veterinary sales accounted for 83% of total sales, Medical sales contributed 15.2% 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 1.3% year over year to $48.4 million, driven by a 5% improvement in veterinary consumable revenues to $39.6 million. Veterinary instrument revenues were down 20% year over year to $6.7 million.

Revenues from the medical market were down from $9.1 million year over year to $8.9 million as strength in Piccolo instrument was offset by declines in medical rotors. Also, revenues at the North American medical division totaled $5.9 million, down 8% year over year. On a global basis, Abaxis sold 261 Piccolos in the quarter compared with 227 a year ago.

Abaxis exhibited strong consumable growth, up 3% year over year to $46.0 million in the quarter. Within the consumable product lines, total rotor revenue was $31.4 million, almost in line with $31.3 million in the year-ago quarter. The upside in vet rotor revenues was mostly offset by a decline in medical rotor revenues. On a global basis, Abaxis sold 2.46 million rotor units in the current quarter, down from 2.49 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 13% to $8.8 million due to lower veterinary instrument sales. Abaxis sold a total of 1,275 instruments on a global basis in the fiscal first quarter, down from 1,533 in the year-ago quarter.

Operational Updates

Fiscal first-quarter’s gross profit dropped 0.2% to $31.9 million. Gross margin contracted 63 basis points (bps) to 54.8%.

Research and development expenses increased 22.9% year over year to $6.4 million and sales and marketing expenses rose 5.7% to $12.5 million. General and administrative expenses also increased 8.3% to $4.6 million. The resultant operating income was down 21.2% to $8.5 million in the quarter, while operating margin declined 409 bps to 14.5%.

Financial Update

Abaxis exited the fiscal first quarter with cash, cash equivalents and short-term investments of $137.7 million, compared with $142.9 million in fourth-quarter fiscal 2017.

Our Take

Abaxis started off fiscal 2018 on a disappointing note. In the fiscal first quarter, the company missed estimated on both the fronts. 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 during the quarter.

Meanwhile, we are encouraged to note that the company is initiating new sales and marketing strategies. The company launched a new Phenobarbital Profile rotor. Furthermore, the company has launched six-pack phenobarbital rotors to supplement the 12-pack launch. The company has also recently launched new canine specific pancreatic lipase test. Abaxis plans additional product launches in fiscal 2018, including the VetScan FUSE connectivity system.  According to the company, addition of these products will potentially drive growth over the long haul.

Zacks Rank & Key Picks

Abaxis currently has a Zacks Rank #3 (Hold).A few better-ranked medical stocks are Mesa Laboratories, Inc. MLAB, INSYS Therapeutics, Inc. INSY and Align Technology, Inc. ALGN. Notably, INSYS Therapeutics sports a Zacks Rank #1 (Strong Buy), while Mesa Laboratories and Align Technology carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

INSYS Therapeutics has a long-term expected earnings growth rate of 20%. The stock has gained around 1.9% over the last three months.

Mesa Laboratories has a positive earnings surprise of 2.8% for the last four quarters. The stock has added roughly 2.6% over the last three months.

Align Technology has an expected long-term adjusted earnings growth of almost 24.1%. The stock has added roughly 16.8% over the last three months.

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