Solid 4Q for Conceptus - Analyst Blog
February 11 2013 - 4:10AM
Zacks
Contraception device maker-
Conceptus Inc. (CPTS) reported earnings per share
(EPS) of 17 cents during the fourth quarter of fiscal 2012,
compared with a net loss of 8 cents per share in the year-ago
quarter. The reported EPS surpassed the Zacks Consensus Estimate by
5 cents. The improvement in the bottom line was primarily driven by
low interest and other expenses during the quarter. For fiscal
2012, EPS was 16 cents compared with a net loss of 25 cents per
share in 2011.
Revenues in the reported quarter
recorded a robust hike of 21.5% year over year (up 23.6% at
constant exchange rate or CER) to $40.7 million, beating of the
Zacks Consensus Estimate of $40 million. This includes a 19.3%
increase in domestic sales to $32.2 million and growth of 30.8% in
international sales to $8.5 million. Net sales for fiscal 2012 were
$140.7 million, up 10.8% and beating the Zacks Consensus Estimate
of $140 million. Revenues remained in line with the company’s
guided range of $140–$144 million.
Even amid several macroeconomic
headwinds in the form of persistent unemployment and limited
consumer spending, the improvement in the reported quarter
primarily came on the back of a 13.5% increase in organic revenues
and the exit of the company’s direct peer
Hologic’s (HOLX) Adiana from the permanent birth
control market. The conversion of Adiana’s market share added 7.1%
to the company’s growth in the reported quarter. Moreover,
Conceptus’ gradual progress in improving commercial execution is
steadily accelerating its growth rate.
Conceptus derives a major share of
its revenues from the Essure permanent birth control system. The
domestic sales for Essure during the quarter were up 20.6% year
over year.
Sales of the Essure system depends
on the number of physicians trained to perform the procedure.
Conceptus is striving toward making the system available worldwide
by raising consumer and physician awareness as well as training
physicians to perform the procedure.
During the reported quarter, the
company expanded its U.S. physician penetration by enrolling 427
new physicians into preceptorship, certifying approximately 288
physicians and transitioning approximately 77 physicians to
performing procedures in the office setting. To date, around 16,000
physicians are fully equipped to perform the Essure procedure.
Conceptus reported gross profit of
$34.2 million, up 22.5% from $27.9 million in the fourth quarter of
2011. Gross margin during the quarter expanded 66 basis points
(bps) to 84.1%.
Operating expenses declined 19.1%
to $24.9 million, driven by the company's lower marketing
expenditures related to the direct-to-consumer campaign, lower
selling expenses associated with sales force headcount reductions
and lower legal fees. As a result, operating margin during the
reported quarter expanded a huge 3133 bps to 22.9%.
Conceptus exited the fiscal with
cash, cash equivalents and short-term investments of $69.9 million
compared with $101.4 million at the end of fiscal 2011. In the
third quarter, the company’s cash flow from operations was $11.2
million.
Guidance
Conceptus provided its fiscal 2013 outlook. The company expects
annual revenues in the range of $155–$159 million, up 10%–13% year
over year. The current Zacks Consensus Estimate of $159 million
remains at the upper end of the guided range.
Our
recommendation
The exit of Adiana from the
permanent birth control market should be highly beneficial for
Conceptus. The company is upbeat regarding the fact that under the
Patient Protection and Affordable Care Act of 2010 (“PPACA”), the
entire list of contraceptive methods approved by the U.S. Food and
Drug Administration (“FDA”), including the Essure procedure, will
be covered by all private insurance plans. We believe that these
recent tailwinds will largely benefit the company’s sales
performance as it will increase access and affordability of the
Essure procedure worldwide. However, we remain concerned about the
limited growth visibility arising from difficult macroeconomic
conditions, resulting in a weak hysteroscopic sterilization
market.
Currently, Conceptus retains a
Zacks Rank #2 (Buy). Other medical stocks such as
ResMed (RMD) and Acadia Healthcare
Company (ACHC), carry a Zacks Rank #1 (Strong Buy) and
warrant a look.
ACADIA HEALTHCR (ACHC): Free Stock Analysis Report
CONCEPTUS INC (CPTS): Free Stock Analysis Report
HOLOGIC INC (HOLX): Free Stock Analysis Report
RESMED INC (RMD): Free Stock Analysis Report
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