On Dec 30, 2014, Zacks Investment Research upgraded RTI Surgical Inc. (RTIX) to a Zacks Rank #1 (Strong Buy).
Why the Upgrade?
Impressive third quarter results, positive guidance revision, new product launches and an innovative product pipeline were the primary reasons behind the upgrade. We note that on an average RTI has outperformed the Zacks Consensus Estimate by 75% in the last four quarters.
RTI’s share price has surged 47.7% year-to-date compared with 13.1% for S&P 500.
In the last reported quarter, RTI posted earnings of 3 cents per share, which not only beat the Zacks Consensus Estimate but were also better than a loss of a penny incurred in the year-ago quarter. Moreover, revenues jumped 19% year over year to $65.2 million and were almost in line with the Zacks Consensus Estimate.
The growth in revenues was driven by strong performance across the segments. Sports medicine, Spine, Orthofixation, and BGS & general orthopedic businesses grew 19%, 16%, 41%, and 20%, respectively.
New product launches in the first half of the year such as Streamline OCT drove the results. During the third quarter, RTI introduced two new products for the sports medicine business – the Precision Allograft Cartilage Instrument Kit (PACK) and the AlloWedge Bicortical Bone Wedges and Instrument Kit.
Based on impressive results, RTI provided a favorable full year 2014 guidance. Revenues are now expected to be in the range of $260 million to $261 million (up from $258 million to $261 million). Management now expects to earn 11 cents compared with the earlier guidance of 9 to 11 cents.
The positive guidance is based on strong revenue growth forecast for all its businesses. Spine is expected to grow in the low teens, while the Sports business is expected to increase in the high single-digit range. The BGS & general orthopedic business is forecast to grow in the mid single digit. On the other hand, Orthofixation is expected to grow in the mid-teen range in 2014.
Estimate Revisions
The respective Zacks Consensus Estimate for fiscal 2014 and 2015 remained steady at 11 cents and 17 cents per share over the last 30 days.
Other Stocks to Consider
One may also consider some other players in the industry that look attractive at current levels. These include Enteromedics (ETRM), Fluidigm (FLDM) and Inogen (INGN). All the three stocks carry the same Zacks Rank as RTI.
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