Analysts Says Azenta Could See Recovery, Stock Likely Rangebound

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  • Azenta Inc AZTA reported a Q1 EPS of $0.12, beating the consensus of $0.08. Sales increased 28% Y/Y to $178.37 million, missing the consensus of $181.73 million.
  • Organic revenue declined 1%, which excludes four percentage points of headwind from foreign exchange and $46 million revenue contribution from acquired businesses, B Medical and Barkey.
  • Organic growth was 7%, excluding COVID impacts.
  • Q2 FY23 revenue is expected to be $156-$171 million, and adjusted EPS is forecasted to be $(0.04)-$0.04.
  • Stephens writes that Azenta earnings fell short of consensus estimates but were in line with buy-side expectations. It downgraded the stock from Overweight to Equal-weight with a price target of $60, down from $65.
  • 2Q23 guidance also fell below consensus, which implies a steep back half ramp. 
  • As a result, the analyst is taking a more conservative approach to FY23 estimates, assuming 23% revenue growth vs. guidance for ~30%.
  • It writes that investors will take a wait-and-see approach before putting new money to work in the name while the company is buying back stock. 
  • Needham writes that a lower B Medical contribution primarily drove the revenue shortfall, and management is confident that organic growth should accelerate in 2H23. 
  • Similarly, it looks for margins to improve in 3Q FY23 aided by cost reduction initiatives that could add ~200 bps to the operating margin and natural leverage. 
  • Needham expects 2Q FY23 to be the trough for revenue growth and margins but believes AZTA has visibility to revenue growth acceleration and margin improvement. It reiterates the Buy rating with a price target of $68, down from $78.
  • Price Action: AZTA shares are down 16.76% at $46.80 on the last check Thursday.
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