Cyberonics Posts Strong 2Q - Analyst Blog
November 21 2011 - 8:06AM
Zacks
Cyberonics (CYBX) reported second quarter 2012 EPS of 32
cents, surpassing the Zacks Consensus Estimate of 30 cents and was
28% higher than the year-ago quarter’s adjusted EPS.
Revenues increased 13% year
over year (20% at constant exchange rate or CER) to $53.7 million,
almost in line with the Zacks Consensus Estimate. The growth was
based on higher sales in the U.S (up 11.3% to $45.1 million) and a
23% increase in international revenues to $8.6 million.
Despite withdrawal of two
models of its Aspire platform generators, Cyberonics’ solid US
epilepsy sales stemmed from strong performance of the sales team
and market potential. The company estimated that the average
quarterly growth in new patients in the US exceeded 6% year over
year.
The persistent rebound in
Cyberonics’ overall international business was led by excellent
performance in Europe. Increased investment in the European market
along with changes in the organizational structure enhanced the
company’s performance in this region.
Earlier in August,
Cyberonics discontinued shipment of two models of its Aspire
platform generators. The company also suspended enrollment in
its E-36 clinical trial pending resolution of a hardware related
design issue.
However in October,
Cyberonics submitted application for approvals in both the US and
Europe for redesigning its AspireHC generator. Additionally, the
company expects to resubmit the AspireSR generator to the competent
authority approvals for the resumption of the E-36 clinical trial
in Europe by the end of fiscal 2012.
Further, in October, the US
Food and Drug Administration (FDA) approved an expanded Magnetic
Resonance Imaging (MRI) option, used by patients who have the VNS
Therapy System.
Gross margin for the
quarter expanded 396 basis points (bps) to 92.2%. Selling, general
and administrative (SG&A) expenses as well as Research and
development (R&D) expenses during the quarter increased 15.6%
(to $25.6 million) and 26.5% ($8.9 million) respectively. However,
operating margin was 28.1%, up 116 basis points year over
year.
Cyberonics exited the
quarter with $69.8 million in cash and cash equivalents compared
with $89.3 million reported at the end of fiscal 2011. Operating
cash flow during the quarter increased 33% year over year to $21.7
million.
During the reported
quarter, Cyberonics repurchased approximately 654,000 shares,
completing the repurchase of 1 million shares as authorized by the
Board on June 2011. Additionally, the Board authorized the
repurchase of an additional 1 million shares.
Guidance
Cyberonics increased its
outlook for fiscal 2012. The company expects revenues and income
from operations in the range of $213–$216 million (previous range
was $212–$215 million) and $55–$58 million ($54–$57 million),
respectively. The current Zacks Consensus Revenue Estimate for
revenue in fiscal 2012 stand at $216 million.
Recommendation
Although Cyberonics
witnessed an expansion in the top line attributable to the
company’s strong position in the US and international epilepsy
market, we remain concerned about several headwinds including
withdrawal of shipment of the AspireHC and AspireSR
generators.
Presently, Cyberonics
retains a Zacks #2 Rank (Buy) in the short term. However, over the
long term, we maintain a Neutral recommendation on the stock. The
company faces mounting third-party reimbursement issues along with
stiff competition in the neuromodulation space from players such
as Medtronic (MDT) and St. Jude Medical Inc.
(STJ). Both Medtronic and St. Jude
Medical are Zacks #3 Ranked peers with Neutral
recommendations.
CYBERONICS INC (CYBX): Free Stock Analysis Report
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ST JUDE MEDICAL (STJ): Free Stock Analysis Report
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