Here’s Why Haemonetics Stock Is Undervalued At $63

[Updated: 6/22/2021] Haemonetics Update

We believe that the stock price of Haemonetics (NYSE:HAE), best known for its blood and plasma supplies and services, is undervalued at current levels of $63. HAE stock is down 27% from the levels of around $86 it was at on March 23, 2020, when broader markets made a bottom. This marks a significant underperformance compared to the broader markets with the S&P 500 rising 89% over the same period. The underperformance of HAE stock can largely be attributed to loss of one of its large customers – CSL Pharma.

Looking at a longer time period, HAE stock is also down 37% from the levels of around $100 seen toward the end of 2018 (vs. S&P 500 rise of nearly 70%). Much of this decline can be attributed to unfavorable changes in its P/S multiple. Haemonetics’ total revenue declined 10% to $870 million over the last twelve month period, compared to $968 million in fiscal 2019 (fiscal ends in March). The revenue decline can largely be attributed to the impact of the Covid-19 pandemic on the company’s business, with reduced plasma demand. The company saw a 2.4% drop in total shares outstanding due to share repurchases.

As such, on a per share basis, Haemonetics’ revenue declined 8% to $17.34 for the last twelve month period, compared to $18.82 in fiscal 2019. Despite only a 8% decline in revenue per share (RPS) over the recent years, Haemonetics’ P/S multiple has contracted a large 40% to 3.7x currently, compared to levels of 6x and above seen over the recent years, and we believe that the multiple will expand going forward. Our dashboard, ‘What Factors Drove -37% Change In Haemonetics Stock between 2018 and now?‘, has the underlying numbers.

Outlook

While we know that the development around CSL Pharma was a negative for Haemonetics, it accounted for only 11.8% of the company’s total sales. In comparison, HAE stock has lost 50% of its value since the announcement in April of this year. Haemonetics has multiple positives to look forward to. The company recently acquired Cardiva Medical, which owns the only approved post-(by the U.S. FDA) cardiac ablations vascular closure device. ^[1] The acquisition will help Haemonetics increase its presence in the fast-growing interventional cardiology and electrophysiology markets, bolstering its revenue growth going forward.

Furthermore, now that 45% of the U.S. population is fully vaccinated, the economy is expected to open up sooner and this will bode well for Haemonetics’ business. The company will likely see volume growth for its plasma disposables as well as better pricing for NexSys PCS, with the latest regulatory approval. NexSys PCS, a plasma collection device, enables higher plasma yield collection, and its newest addition of Persona technology helps customize plasma collection based on an individual body composition. NexSys PCS with Persona was approved by the U.S. FDA in Q4 last year.

Looking at the valuation, Haemonetics, at the current price of $63, is trading at just 3.2x its expected RPS of $19.75 for fiscal 2022, compared to levels of over 5x seen in 2018 and 2019, implying there is more room for growth. While the average analyst price estimate for HAE stock is at $80 currently, reflecting a 27% premium to the current market price, we believe it can see even higher levels in the long run.

[Updated: 5/18/2021] HAE Q4 Update

The stock price of Haemonetics (NYSE:HAE), best known for its blood and plasma supplies and services, has seen a large 13% drop over the last ten trading days, and we believe the stock will likely rebound in the near term. The 13% drop can primarily be attributed to the company’s recently announced fiscal Q4 numbers, which were below the street estimates. Haemonetics’ Q4 revenue of $221 million was slightly below the $223 million street estimate, while its adjusted EPS of $0.46 was much lower than the $0.67 consensus estimate. Investors weren’t happy with the company’s performance and the stock plunged over 13% in a single trading session (May 13), following the earnings announcement. The company’s management stated that the pandemic continues to weigh on its performance, and it expects a rebound as the Covid-19 crisis winds down.

Haemonetics is having a rough year thus far. HAE stock is down 50% year-to-date. A large decline in the stock was seen last month, when the company announced that CSL Pharma, one of its largest customers, has decided not to renew its contract with Haemonetics. The stock did recover slightly from lows of $52 seen on May 13 to $57 now, while it remains down 4.9% over the last five trading days.

Looking at the recent decline, the 13% drop for HAE stock over the last ten days compares with a 0.7% decline seen in the broader S&P 500 index. Now, is HAE stock poised to drop further or is a rebound after the recent decline imminent? We believe that HAE stock will rebound in the near term, given the company’s positive outlook for fiscal 2022, with revenue growth of 10% and EPS growth of 19% at the mid-point of the provided guidance, primarily led by a recovery in demand as the Covid-19 crisis winds down. Also, based on our machine learning analysis of trends in the stock price over the last few years, there is a 61% chance of a rise in HAE stock over the next twenty-one trading days.

Out of 179 instances in the last 10 years that Haemonetics (HAE) stock saw a five-day decline of 4.9% or more, 109 of them resulted in HAE stock rising over the subsequent one month period (21 trading days). This historical pattern reflects 109 out of 179, or about 61% chance of a gain in HAE stock over the coming month. Our analysis on Haemonetics Stock Chances of Rise provides more details.

Ten Days: HAE -13%, vs. S&P500 -0.7%; Underperformed market

(2% likelihood event)

• Haemonetics stock declined 13% over the last ten trading days (two weeks), compared to broader market (S&P500) decline of 0.7%
• A change of -13% or more over ten trading days is a 2% likelihood event, which has occurred 53 times out of 2511 in the last ten years

[Updated: 4/20/2021] HAE Stock Plunges 36% In A Single Trading Session

The stock price of Haemonetics (NYSE:HAE), best known for its blood and plasma supplies and services, plunged over 36% in a single trading session yesterday. This can be attributed to one of its large customers – CSL Pharma – stating that it will not renew its contract (expires in June 2022) with Haemonetics for the use of PCS2 Plasma Collection System devices. This is a big negative for the company, given that CSL U.S. contributed $117 million (12%) of the company’s total 2020 revenue. The company stated that it will incur a $25 million impairment charge and another $7 million in other expenses related to this development.

The stock may remain sideways in the near term unless there is a positive trigger around its top-line expansion. That said, going by past performance, returns for HAE stock average around 3.2% in the next one-month (twenty-one trading days) period after experiencing a 5% fall in a week (five trading days). Notably, though, the stock is likely to beat S&P500 returns by 1.5% over the next month (twenty-one trading days).

But how would these numbers change if you are interested in holding Haemonetics stock for a shorter or a longer time period? You can test the answer and many other combinations on the Trefis Machine Learning Engine to test Haemonetics stock chances of a rise after a fall. You can test the chance of recovery over different time intervals of a quarter, month, or even just one day!

[Updated: 12/1/2020] HAE Stock Performance 2020 vs. 2008

We believe that Haemonetics stock (NYSE: HAE), best known for its blood and plasma supplies and services, is a good buying opportunity at the present time. HAE stock trades near $113 currently and it is, in fact, down 7% from its pre-Covid high of $122 in February 2020 – just before the coronavirus pandemic hit the world. HAE stock has rallied around 53% since its March lows of $74, slightly underperforming the broader markets, with the S&P 500 seeing 62% gains. The growth in HAE stock over the recent months is supported by better than estimated revenues and earnings posted in the recent quarters, as we discuss in the section below. Now with economies opening up, the company will likely see improved sales growth and margin expansion, driving the stock higher from here, in our view. Our conclusion is based on our comparative analysis of Haemonetics stock performance during the current financial crisis with that during the 2008 recession in our interactive dashboard.

2020 Coronavirus Crisis

Timeline of 2020 Crisis So Far:

• 12/12/2019: Coronavirus cases first reported in China
• 1/31/2020: WHO declares a global health emergency.
• 2/19/2020: Signs of effective containment in China and hopes of monetary easing by major central banks helps S&P 500 reach a record high
• 3/23/2020: S&P 500 drops 34% from the peak level seen on Feb 19, as COVID-19 cases accelerate outside China. Doesn’t help that oil prices crash in mid-March amid Saudi-led price war
• Since 3/24/2020: S&P 500 recovers 62% from the lows seen on Mar 23, as the Fed’s multi-billion dollar stimulus package suppresses near-term survival anxiety and infuses liquidity into the system.

In contrast, here is how HAE stock and the broader market fared during the 2007-08 crisis

Timeline of 2007-08 Crisis

• 10/1/2007: Approximate pre-crisis peak in S&P 500 index
• 9/1/2008 – 10/1/2008: Accelerated market decline corresponding to Lehman bankruptcy filing (9/15/08)
• 3/1/2009: Approximate bottoming out of S&P 500 index
• 12/31/2009: Initial recovery to levels before accelerated decline (around 9/1/2008)

HAE and S&P 500 Performance Over 2007-08 Financial Crisis

HAE stock moved up from levels of about $25 in September 2007 (pre-crisis peak for the markets) to levels of $32 in August 2008, and from there it dropped slightly to $27 in March 2009 (as the markets bottomed out), implying HAE stock lost just 14% from its pre-crisis highs, while it was actually up 7% between September 2007 and March 2009. It gained 3% post the 2008 crisis to levels of $28 by January 2010. In comparison, the S&P 500 Index saw a decline of 51% from its peak in September 2007 to its bottom in March 2009, followed by a sharp recovery of 48% by January 2010.

Haemonetics Fundamentals Over Recent Years Have Been Strong

Haemonetics revenues increased from $909 million in fiscal 2016 (fiscal ends in March) to $989 million in 2020, led by expansion of its plasma collection products, including NexSys. While the revenue growth rate was slow, the company has seen its Net Margins expand from -6% to 8% over the same period. This meant that its EPS grew from $(1.09) to $1.51. More recently, Haemonetics posted 17% revenue decline in Q2 fiscal 2021, primarily due to a 32% drop in Plasma revenues. This can be attributed to an overall decline in the volume of plasma disposables, due to the impact of the C0vid-19 pandemic. The company’s earnings of $0.95 per share grew 28% compared to $0.74 in prior year quarter, led by continued Net Margin expansion. It should be noted that the company is focused on improving its margins and it is currently working on two programs – Complexity Reduction Initiative and Operational Excellence Program – aimed to reduce overall costs.

Does Haemonetics Have Sufficient Cash Cushion To Meet Its Obligations Through The Coronavirus Crisis?

Haemonetics total debt increased from $315 million in 2017 to $464 million at the end of Q2 2021, while its total cash increased from $140 million to $279 million over the same period. Haemonetics generated $41 million in cash from operations in the first six months of fiscal 2021. The company has enough liquidity cushion to weather the current crisis.

Conclusion

Phases of Covid-19 Crisis:

• Early- to mid-March 2020: Fear of the coronavirus outbreak spreading rapidly translates into reality, with the number of cases accelerating globally
• Late-March 2020 onward: Social distancing measures + lockdowns
• April 2020: Fed stimulus suppresses near-term survival anxiety
• May-June 2020: Recovery of demand, with gradual lifting of lockdowns – no panic anymore despite a steady increase in the number of cases
• July-October 2020: After poor Q2 results, Q3 expectations were lukewarm, but continued improvement in demand, and progress with vaccine development buoyed market sentiment

As the global economy opens up and lockdowns are lifted in phases, consumer demand is expected to pick up. This could be reflected in the form of a pick-up in revenue growth toward the end of 2020, followed by revenue growth in 2021, boding well for the HAE stock in the near term. While HAE stock has 8% upside for it to recover to pre-Covid highs, we believe the stock could trend much higher than that in the near term, primarily due to continued expansion of its margins.

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1. Haemonetics Press Release, Jan 20, 2021 [↩]