Haemonetics (HAE)

Blood products company Haemonetics (NYSE:HAE). announced better-than-expected revenue in Q1 CY2025, but sales fell by 3.7% year on year to $330.6 million. Its non-GAAP profit of $1.24 per share was 1.6% above analysts’ consensus estimates.

Company Overview

With roots dating back to 1971 and a mission to improve blood-related healthcare, Haemonetics (NYSE:HAE) provides specialized medical devices and software for blood collection, processing, and management across plasma centers, blood banks, and hospitals.

The medical devices industry operates a business model that balances steady demand with significant investments in innovation and regulatory compliance. The industry benefits from recurring revenue streams tied to consumables, maintenance services, and incremental upgrades to the latest technologies, although specialty devices are more niche. The capital-intensive nature of product development, coupled with lengthy regulatory pathways and the need for clinical validation, can weigh on profitability and timelines. In addition, there are constant pricing pressures from healthcare systems and insurers maximizing cost efficiency. Over the next several years, one tailwind is demographic–aging populations means rising chronic disease rates that drive greater demand for medical interventions and monitoring solutions. Advances in digital health, such as remote patient monitoring and smart devices, are also expected to unlock new demand by shortening upgrade cycles. On the other hand, the industry faces headwinds from pricing and reimbursement pressures as healthcare providers increasingly adopt value-based care models. Additionally, the integration of cybersecurity for connected devices adds further risk and complexity for device manufacturers.

Haemonetics faces competition from several medical technology companies across its business segments. In the Plasma market, it primarily competes with Fresenius and Terumo Blood and Cell Technologies (Terumo BCT). In the Hospital segment, competitors include Abbott Laboratories, Cardinal Health, and LivaNova for various product lines.

Larger companies benefit from economies of scale, where fixed costs like infrastructure, technology, and administration are spread over a higher volume of goods or services, reducing the cost per unit. Scale can also lead to bargaining power with suppliers, greater brand recognition, and more investment firepower. A virtuous cycle can ensue if a scaled company plays its cards right.

With just $1.36 billion in revenue over the past 12 months, Haemonetics is a small company in an industry where scale matters. This makes it difficult to build trust with customers because healthcare is heavily regulated, complex, and resource-intensive.

Examining a company’s long-term performance can provide clues about its quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years. Over the last five years, Haemonetics grew its sales at a mediocre 6.6% compounded annual growth rate. This was below our standard for the healthcare sector and is a poor baseline for our analysis.

We at StockStory place the most emphasis on long-term growth, but within healthcare, a half-decade historical view may miss recent innovations or disruptive industry trends. Haemonetics’s annualized revenue growth of 7.9% over the last two years is above its five-year trend, suggesting some bright spots.

Haemonetics also reports organic revenue, which strips out one-time events like acquisitions and currency fluctuations that don’t accurately reflect its fundamentals. Over the last two years, Haemonetics’s organic revenue averaged 6.8% year-on-year growth. Because this number aligns with its normal revenue growth, we can see the company’s core operations (not acquisitions and divestitures) drove most of its results.

This quarter, Haemonetics’s revenue fell by 3.7% year on year to $330.6 million but beat Wall Street’s estimates by 1%.

Looking ahead, sell-side analysts expect revenue to decline by 2.5% over the next 12 months, a deceleration versus the last two years. This projection is underwhelming and suggests its products and services will face some demand challenges.

Operating margin is a key measure of profitability. Think of it as net income - the bottom line - excluding the impact of taxes and interest on debt, which are less connected to business fundamentals.

Haemonetics has done a decent job managing its cost base over the last five years. The company has produced an average operating margin of 12.5%, higher than the broader healthcare sector.

Looking at the trend in its profitability, Haemonetics’s operating margin rose by 6 percentage points over the last five years, as its sales growth gave it operating leverage. Zooming in on its more recent performance, we can see the company’s trajectory is intact as its margin has also increased by 2.9 percentage points on a two-year basis.

In Q1, Haemonetics generated an operating profit margin of 21.6%, up 12.9 percentage points year on year. This increase was a welcome development, especially since its revenue fell, showing it was more efficient because it scaled down its expenses.

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

Haemonetics’s decent 6.7% annual EPS growth over the last five years aligns with its revenue performance. This tells us its incremental sales were profitable.

In Q1, Haemonetics reported EPS at $1.24, up from $0.90 in the same quarter last year. This print beat analysts’ estimates by 1.6%. Over the next 12 months, Wall Street expects Haemonetics’s full-year EPS of $4.57 to grow 8.1%.

Free cash flow isn't a prominently featured metric in company financials and earnings releases, but we think it's telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.

Haemonetics has shown decent cash profitability, giving it some flexibility to reinvest or return capital to investors. The company’s free cash flow margin averaged 7% over the last five years, slightly better than the broader healthcare sector.

Taking a step back, we can see that Haemonetics’s margin dropped by 10.4 percentage points during that time. If its declines continue, it could signal increasing investment needs and capital intensity.

Haemonetics burned through $70.83 million of cash in Q1, equivalent to a negative 21.4% margin. The company’s cash flow turned negative after being positive in the same quarter last year, suggesting its historical struggles have dragged on.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? A company’s ROIC explains this by showing how much operating profit it makes compared to the money it has raised (debt and equity).

Haemonetics historically did a mediocre job investing in profitable growth initiatives. Its five-year average ROIC was 7.3%, somewhat low compared to the best healthcare companies that consistently pump out 20%+.

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. On average, Haemonetics’s ROIC increased by 2 percentage points annually over the last few years. This is a good sign, and we hope the company can continue improving.

Haemonetics reported $306.8 million of cash and $1.22 billion of debt on its balance sheet in the most recent quarter. As investors in high-quality companies, we primarily focus on two things: 1) that a company’s debt level isn’t too high and 2) that its interest payments are not excessively burdening the business.

With $419.7 million of EBITDA over the last 12 months, we view Haemonetics’s 2.2× net-debt-to-EBITDA ratio as safe. We also see its $16.7 million of annual interest expenses as appropriate. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.

We were impressed by how significantly Haemonetics blew past analysts’ organic revenue expectations this quarter. We were also happy its revenue narrowly outperformed Wall Street’s estimates. On the other hand, its full-year EPS guidance missed. Overall, this print had some key positives. The stock traded up 2.4% to $65.79 immediately following the results.

Updated: May 16, 2025 at 11:21 PM EDT

A common mistake we notice when investors are deciding whether to buy a stock or not is that they simply look at the latest earnings results. Business quality and valuation matter more, so we urge you to understand these dynamics as well.

Haemonetics’s business quality ultimately falls short of our standards. To begin with, its revenue growth was mediocre over the last five years, and analysts expect its demand to deteriorate over the next 12 months. And while Haemonetics’s rising cash profitability gives it more optionality, its subscale operations give it fewer distribution channels than its larger rivals.

Haemonetics’s P/E ratio based on the next 12 months is 14.3x. Investors with a higher risk tolerance might like the company, but we think the potential downside is too great. We're fairly confident there are better stocks to buy right now.

Wall Street analysts have a consensus one-year price target of $91.10 on the company (compared to the current share price of $70.31).

Although the price target is bullish, readers should exercise caution because analysts tend to be overly optimistic. The firms they work for, often big banks, have relationships with companies that extend into fundraising, M&A advisory, and other rewarding business lines. As a result, they typically hesitate to say bad things for fear they will lose out. We at StockStory do not suffer from such conflicts of interest, so we’ll always tell it like it is.

Want to invest in a High Quality big tech company? We’d point you in the direction of Microsoft and Google, which have durable competitive moats and strong fundamentals, factors that are large determinants of long-term market outperformance.

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