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Morgan Stanley Turns Bullish On Haemonetics, Raymond James Moves To The Sidelines

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Morgan Stanley Turns Bullish On Haemonetics, Raymond James Moves To The Sidelines

Haemonetics Corporation (NYSE: HAE), a provider of blood and plasma services and supplies, may be benefiting from improved visibility on  its transformation, according to Morgan Stanley. Raymond James also sounded upbeat on the medical technology name, with the view that Haemonetics has limited near-term negative catalysts.

The Analysts

Morgan Stanley analyst David Lewis upgraded shares of Haemonetics from Equal-Weight to Overweight and increased the price target from $51 to $74.

Raymond James analyst Lawrence Keusch upgraded the firm's rating on Haemonetics from Underperform to Market Perform.

Increased Confidence From Morgan Stanley 

The Haemonetics story is tied to its long-range plan of doubling operating income and quadrupling free cash flow by fiscal 2021, Morgan Stanley analyst Lewis said in a Tuesday note. (See Lewis' track record here.) 

The turnaround was primarily levered to one product, namely the NexSys plasma apheresis system, Lewis said. Limited visibility on NexSys kept Morgan Stanley on the sidelines until now, the analyst said. 

NexSys is due to be launched in mid-2018, which is the company's fiscal 2019, the analyst said. 

Morgan Stanley said it is now confident that Haemonetics can exceed its long-range plan goals and materially outperform expectations.

The firm estimates a 2021 EBIT of $259 million, 8 percent above the company's long-range plan goals and 30 percent above consensus estimates. Morgan Stanley's bull case assumes greater NexSys yield benefits and cost savings along with balance sheet optionality, resulting in a 2021 EBIT of $310 million.

The factors in Morgan Stanley's bull case are:

  • Incremental 50-cent-per liter NexSys prices due to higher yield benefits.
  • Third-party financing for NexSys.
  • 50 percent greater complexity reduction initiative drop-through.
  • Greater revenues in the hospital division thanks to capital deployment.

"While not included in our current EPS estimates, we note that with tax reform, Haemonetics' tax rate could trend toward 20 percent in FY21 versus the 27.5 percent we currently model, which could be a 10-percent lift to FY21 EPS," Lewis said. 

Raymond James: 'We Move To The Sidelines' 

Structural concerns regarding Haemonetics' ability to fully execute on the targeted price premium for the NexSys plasmapheresis device remain in place, said Raymond James' Keusch. (See the analyst's track record here.) 

The concerns pertain to the device's ability to demonstrate attractive economics in a donor setting and competitive threats from Fresenius Medical Care AG & Co. (ADR)(NYSE: FMS), the analyst said. 

"However, with disposables pricing not likely be known for several quarters and near-term financial objectives that appear achievable, we move to the sidelines," Keusch said. 

Raymond James' neutral stance is "underpinned by valuation that appears to reflect much good news," he said. 

The Price Action

Over the past year, shares of Haemonetics have added more than 54 percent.

At the time of writing, the shares were surging up 7.75 percent to $62.58. 

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Latest Ratings for HAE

DateFirmActionFromTo
Aug 2020Raymond JamesMaintainsOutperform
Jul 2020Morgan StanleyMaintainsOverweight
Jul 2020Raymond JamesMaintainsOutperform

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