On Sep 11, we retained Abiomed Inc. (ABMD) at Neutral, following its not-so-impressive first-quarter fiscal 2014 results. Although the company is making significant progress with its flagship Impella products, higher operating as well as legal expenses is pressurizing ABMD’s bottom line.
Why the Retention?
On Aug 1, the leading cardiac assist devices maker’s first-quarter fiscal 2014 adjusted earnings dropped 37.5% to 5 cents per share. It also missed the Zacks Consensus Estimate of 6 cents by 16.7%. However, revenues climbed 10% in the quarter to $42.7 million, which was roughly in line with the Zacks Consensus Estimate.
Following the release of fiscal first quarter results, the Zacks Consensus Estimate for fiscal 2014 plunged 45.5% to 12 cents. However, the same for fiscal 2015 marginally declined by 3.7% to 52 cents.
The company’s engagement in a number of legal issues and various regulatory submissions are increasing expenses, which, in turn, resulted in net loss in the fiscal first quarter. This has also driven management to lower its operating margin guidance for fiscal 2014. However, they are confident that bottom line will stabilize in 2015 on the back of cost saving measures and controlled SG&A and R&D spending.
ABMD is a medical device company with a blue streak growth path. The company enjoys a strong demand for its Impella products. Multiple near-term drivers, including new products and clinical trials, should further boost the use of Impella. The company also has a solid cash position.
Other Stocks to Consider
Currently, ABMD has a Zacks Rank #3 (Hold). However, other medical instrument companies such as Luminex (LMNX), Given Imaging (GIVN) and Echo Therapeutics (ECTE) are worth considering. All these stocks carry a Zacks Rank #2 (Buy).
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