Shift To High-Margin Interventional Technologies Will Strengthen Future Prospects

Key Takeaways

• Strategic divestitures and focus on high-margin segments expected to enhance profitability and drive revenue and margin growth.
  
• New agreements and innovations in Blood Management Technologies position Haemonetics for significant market share increases and global technology adoption.
  
• Haemonetics faces challenges in market conditions, plasma collections, and specific technologies, posing risks to revenue, growth, and liquidity management.

Catalysts

A healthcare company, provides suite of medical products and solutions in the United States and internationally.

• Haemonetics is experiencing considerable growth in its hospital business, driven by its innovative Blood Management Technologies and Hemostasis management products, which are expanding market share and utilization, particularly in the U.S. and EMEA. This is likely to contribute to future revenue growth.
  
• The recent strategic divestitures, such as the sale of its Whole Blood franchise, are refocusing Haemonetics' resources towards higher-margin, high-growth business lines, which will improve profitability and are expected to facilitate both revenue and margin expansion.
  
• New long-term agreements with key customers like BioLife and Grifols in the plasma sector highlight Haemonetics’ potential for increasing market share and enhancing technology adoption globally, which will drive revenue and margin growth.
  
• Continued innovation and adoption of high-margin products in the interventional technology space, such as VASCADE MVP and MVP XL, have poised the company for outsized growth in these segments. This shift is anticipated to significantly contribute to profitability and overall earnings increase.
  
• Anticipated growth in plasma collections, following seasonal recovery and client technology upgrades, is projected to enhance both revenue and margin growth over the coming fiscal years, contributing to Haemonetics' broader profitability strategy.

Haemonetics Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Haemonetics's revenue will grow by 5.5% annually over the next 3 years.
• Analysts assume that profit margins will increase from 9.5% today to 17.6% in 3 years time.
• Analysts expect earnings to reach $283.3 million (and earnings per share of $5.67) by about March 2028, up from $130.1 million today. However, there is some disagreement amongst the analysts with the more bearish ones expecting earnings as low as $215.5 million.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 20.3x on those 2028 earnings, down from 25.0x today. This future PE is lower than the current PE for the US Medical Equipment industry at 28.7x.
• Analysts expect the number of shares outstanding to decline by 1.19% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.57%, as per the Simply Wall St company report.

Haemonetics Future Earnings Per Share Growth

Risks

• Haemonetics faces difficult market conditions in China, which may impede revenue growth from this region.
  
• The temporary pullback in plasma collections could negatively affect revenue and margin expansion in the near term.
  
• Continued competition in coronary and peripheral procedures has lowered growth in the small bore arterial closure segment, potentially impacting revenue generation.
  
• Sensor Guided Technologies and esophageal cooling are underperforming against Haemonetics' targets, which could hinder anticipated revenue and earnings growth.
  
• Working capital challenges, driven by higher inventory levels, have impacted cash flow and could affect future liquidity if not managed effectively.

Valuation

• The analysts have a consensus price target of $96.4 for Haemonetics based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $120.0, and the most bearish reporting a price target of just $68.0.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $1.6 billion, earnings will come to $283.3 million, and it would be trading on a PE ratio of 20.3x, assuming you use a discount rate of 7.6%.
• Given the current share price of $64.68, the analyst price target of $96.4 is 32.9% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.