Heska Corp. (HSKA) is trading sharply higher today (+10%) on a strong Q4 report. Before getting into the report, some background would help as most investors are probably not too familiar with Heska.
The company sells veterinary diagnostic products with a core focus on companion animals (canine and feline). Products include blood testing instruments, digital imaging products, software as well as single use products (in-clinic heartworm tests, heartworm preventive products, allergy tests etc.) It also sells private label vaccines and pharmaceuticals for cattle and small mammals.
Heska says it's a play on changing veterinary practices. Vets have moved away from annual vaccines and marked-up pharma sales (the move toward generic drugs makes marking up more difficult). As such, vets are moving more toward wellness and diagnostic products.
A big trend is for vets wanting the ability to perform diagnostic testing in-house so results come back while pet owners are there rather than waiting days for an outside lab. It works well for Heska in that it makes money on the blood analyzer equipment sales and it has an ongoing revenue stream from the consumables. Of note, HSKA's recently launched Element HT5 five-part hematology analyzer has been very popular as it's quite a bit faster than older models.
Turning to the Q4 results, EPS rose 64% YoY to $0.46, which was quite a bit better than market expectations. Revenue rose 32.6% year/year to $39.5 mln, which also was better than expected. There was no guidance as is usually the case with Heska.
During its last earnings release, Heska indicated that it was tracking a robust pipeline, gaining market share, and seeing continued net subscriber growth. All of this helped generate the strong Q4 results. Imaging diagnostics had a record Q4, and in blood diagnostics, Heska continued to gain market share in a sustainable fashion, with strong Reset program net subscriber and months under contract gains.
Heska says that veterinary market indicators continue to point towards broad based growth in 2017, led by the diagnostics segment served by Heska. Specific to Heska, the company is targeting growth from a mix of market share gains in existing markets, geographical and greenfield expansion, product line extensions, test menu additions, higher sales force density, healthy pricing, new partnerships and increased utilization from its thousands of subscribers as their own businesses grow.
In sum, this was a strong quarter for Heska and investors appear to be pleased with the results. The stock has been quite strong over the past year as Heska has been consistently beating market expectations when it comes to earnings. Overall, Heska seems like it's well positioned as veterinary practices are changing.