Cyberonics Posts Strong 3Q - Analyst Blog
February 27 2012 - 5:00AM
Zacks
Cyberonics (CYBX)
reported third quarter 2012 EPS of 34 cents, surpassing the Zacks
Consensus Estimate of 30 cents and was 36% higher than the year-ago
quarter’s adjusted EPS.
Revenues increased 16% year over
year (same at constant exchange rate or CER) to $54.5 million and
surpassed the Zacks Consensus Estimate of $53 million. The growth
was based on higher domestic sales (up 15% to $45.2 million) and a
24% increase in international revenues to $8.7 million,reflecting
strong performance in Europe.
Earlier in January, Cyberonics
received approval from the US Food and Drug Administration (FDA)
for its re-designed AspireHC (High Capacity) generator whose
shipment was discontinued by the company earlier. The FDA approval
of AspireHC is expected to pave the way for the Aspire SR seizure
response system generator, which is the subject of the E-36
clinical trial in Europe. Cyberonics plans to submit the
re-designed AspireSR generator to the ethics committee and
competent authority approvals for the E-36 clinical trial by the
end of fiscal 2012.
Cost of sales during the reported
quarter declined 29.4% year over year and led to a 490 basis points
(bps) expansion in gross margin to 92.5%. Selling, general and
administrative (SG&A) expenses and research and development
(R&D) expenses during the quarter increased 12.9% to $24.9
million and 21.4% to $9.1 million, respectively. Operating margin
during the quarter was up 520 bps year over year to 30.1%.
Cyberonics exited the quarter with
$78.1 million in cash and cash equivalents compared with $89.3
million at the end of fiscal 2011. Operating cash flow during the
quarter increased 59% year over year to $21.1 million. During the
reported quarter, Cyberonics repurchased approximately 178,000
shares.
Guidance
Cyberonics increased its revenue
outlook for fiscal 2012. The company expects revenues and income
from operations in the range of $215–$217 million (previous range
was $213–$216 million) and $58–$60 million ($55–$58 million)
respectively. The current Zacks Consensus Estimate for fiscal 2012
stand at $216 million.
Recommendation
Cyberonics witnessed an expansion
in the top line on the back of its strong position in the US and
international epilepsy market. Additionally, the company’s effort
to expand in Europe, Japan, Latin America, China and India is
encouraging. The company’s investment in these countries should
boost its international performance for the rest of fiscal 2012.
Also, the re-designed product approval of Cyberonics is a relief
for the company.
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).
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.
CYBERONICS INC (CYBX): Free Stock Analysis Report
MEDTRONIC (MDT): Free Stock Analysis Report
ST JUDE MEDICAL (STJ): Free Stock Analysis Report
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