On Wednesday, Evercore ISI took a cautious stance on Azenta, Inc. (NASDAQ: AZTA), reducing its price target to $48 from $50, while keeping an In-Line rating on the stock.
The adjustment came after Azenta posted its fourth-quarter results, which showed a 2% decline in organic revenue, totaling $170 million, in line with Street estimates. The company's Sample Management Services (SMS) grew by 3%, albeit 2% below Street expectations, and its Multiomics business expanded by 8%, roughly in line with Street forecasts.
Azenta's gross margins fell short of Street predictions by approximately 65 basis points, attributed to the Bio-Medical segment's gross margin of around 24%, significantly below the mid-50s percentage expected by the Street.
However, the operating margin of about 4.1% exceeded Street estimates by roughly 170 basis points. Earnings per share (EPS) of 18 cents outperformed expectations by about 60%, primarily due to better-than-anticipated operating margins and a slight boost from a lower tax rate.
In conjunction with the quarterly report, Azenta announced its intention to sell the Bio-Medical business. This strategic move is anticipated to enhance revenue predictability and margin performance. Despite these positive aspects and a financial outlook for fiscal year 2025 that aligns with industry peers, Evercore ISI remains cautious.
The firm's wariness is due to the challenging macroeconomic environment, heightened investor concerns about companies with exposure to China following the elections, and the completion of Azenta's share repurchase program, which removes a possible market catalyst.
The revised price target of $48 by Evercore ISI corresponds to 27 times the calendar year 2025 estimated EBITDA and a free cash flow yield of approximately 1%.
In other recent news, Azenta Inc. announced the planned sale of B Medical (TASE:PMCN) as part of a strategic refocus, aiming to drive future growth in core areas.
In terms of future expectations, Azenta forecasts 3% to 5% organic revenue growth for 2025, excluding B Medical. The company expects Multiomics to grow in the low single digits, while SMS is projected to grow in the mid-single digits. The company's adjusted EBITDA margin is anticipated to expand by approximately 300 basis points year-over-year.
These developments come as Azenta continues its transformation program "Ascend 2026", targeting site rationalization and operational simplification. The company plans to host an Analyst Day in mid-2025 to discuss long-term potential and strategies.
InvestingPro Insights
To complement Evercore ISI's analysis, InvestingPro data provides additional context on Azenta's financial position. Despite the recent challenges highlighted in the article, Azenta holds more cash than debt on its balance sheet, and its liquid assets exceed short-term obligations, indicating a strong financial foundation. This aligns with the company's strategic decision to sell its Bio-Medical business, potentially improving its financial flexibility.
InvestingPro Tips suggest that net income is expected to grow this year, and analysts predict the company will be profitable. This positive outlook contrasts with the current P/E ratio of -34.11, reflecting investor expectations of future earnings improvements. The company's revenue growth of 4.5% over the last twelve months, while modest, supports the potential for future profitability.
It's worth noting that Azenta is trading at a high EBITDA valuation multiple, which may explain Evercore ISI's cautious stance. Investors seeking more comprehensive analysis can access additional InvestingPro Tips, with 5 more tips available for Azenta on the platform.
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