On Friday, JPMorgan (NYSE:JPM) initiated coverage on Haemonetics Corp (NYSE:HAE) stock, a healthcare company specializing in blood and plasma supplies and services, with an Overweight rating and a price target of $116.00. Currently trading at $80.67, InvestingPro analysis suggests the stock is undervalued, with analyst targets ranging from $85 to $125.
The new rating reflects the firm's positive outlook on the company's potential for revenue growth and robust cash flow in the coming years, supported by the company's impressive 9.84% revenue growth over the last twelve months.
The analyst from JPMorgan highlighted several factors that could contribute to Haemonetics' top-line acceleration. These include a shift towards premium, higher-margin interventional products and the normalization of the commercial Plasma business, which had previously faced challenges due to the transition of a major customer, CSL (OTC:CSLLY). The introduction of new products is also expected to drive upgrades.
The firm acknowledges the ongoing debate among investors regarding Haemonetics' long-range plan (LRP) margin targets for the fiscal year 2026.
However, they believe that the company's strong performance in the second fiscal quarter and underlying business trends will likely support operating margins in the high-20% range next year, with potential for further improvement.
InvestingPro data reveals strong financial health with a GOOD overall score, supported by a robust current ratio of 3.49, indicating excellent liquidity management. Additional insights and detailed financial metrics are available in the comprehensive Pro Research Report, part of InvestingPro's coverage of over 1,400 US stocks.
Additionally, JPMorgan is confident in the management's strategy to invest in research and development (R&D), which is seen as crucial to maintaining Haemonetics' competitive edge in the Plasma sector and to further differentiate its interventional product portfolio. This approach is intended to position Haemonetics as a diversified, high-growth business with a strong earnings profile and consistent generation of strong free cash flow over the long term.
The analyst also pointed out that Haemonetics' stock is currently trading at a significant discount compared to its peers, approximately 3-4 times less. While the current P/E ratio stands at 33.34, InvestingPro identifies several positive factors, including management's aggressive share buyback program and strong cash flows that sufficiently cover interest payments.
This valuation is seen as an attractive opportunity for investors, with clear visibility into the company's potential to become a long-term compounder. The growth formula is based on three pillars: premium medical technology top-line and earnings growth, potential for multiple expansion, and strategic buy-backs.
In other recent news, Haemonetics Corporation has been making strategic moves to bolster its financial performance and growth trajectory. The company recently announced the sale of its Whole Blood division to GVS, S.p.A., a transaction expected to finalize in Q1 CY25. The sale, which aligns with Haemonetics' intent to streamline its Whole Blood segment, will see the company receive $44.6 million in cash upfront and up to $22.5 million in contingent considerations over the next four years.
With these recent developments, Haemonetics aims to focus exclusively on Apheresis solutions for automated blood collection in its Blood Center business. The company's current gross profit margin of 55.34% and revenue growth of 9.84% in the last twelve months exhibits strong operational efficiency.
The company also reported a 9% increase in revenue to $346 million in its second quarter of fiscal year 2025, driven by a 31% surge in hospital revenue. Adjusted earnings per share rose 13% to $1.12, leading Haemonetics to raise its organic growth guidance for the year. Despite a 3% decline in plasma revenue, the company maintains its total revenue growth expectation for fiscal 2025 at 5% to 8%.
BTIG reaffirmed its Buy rating for Haemonetics, anticipating a positive response from investors to these strategic moves. The proceeds from the Whole Blood division sale are slated for general corporate use and further investments in the company's growth initiatives.
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