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ABAXIS (ABAX) Up 6.7% Since Earnings Report: Can It Continue?

Zacks Equity Research

A month has gone by since the last earnings report for ABAXIS, Inc. ABAX. Shares have added about 6.7% in that time frame.

Will the recent positive trend continue leading up to the stock's next earnings release, or is it due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Recent Earnings

Abaxis 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 Revenues

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.

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.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended downward during the past month. There have been two revisions lower for the current quarter.

ABAXIS, Inc. Price and Consensus

 

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

 

VGM Scores

At this time, the stock has a nice Growth Score of B, though it is lagging a lot on the momentum front with an F. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

Our style scores indicate that the stock is more suitable for growth investors than value investors.

Outlook

The stock has a Zacks Rank #3 (Hold). We are looking for an inline return from the stock in the next few months.


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