On Jan 14, 2015, Zacks Investment Research upgraded Cyberonics Inc. (CYBX) – a medical technology company with core expertise in neuromodulation – to a Zacks Rank #2 (Buy).
Why the Upgrade?
Despite reimburse-related headwinds, Cyberonics has been witnessing an upward movement in earnings estimates on the back of stellar second-quarter fiscal 2014 results. This Houston, TX-based company delivered positive earnings surprise of 6.78% in the last reported quarter with a trailing four-quarter average beat of 1.38%. The long-term expected earnings growth rate for this stock is currently poised at an impressive 16.3%.
Over the last few quarters, Cyberonics has performed consistently well. In the fiscal second quarter, Cyberonics posted a meaningful 26% rise in its earnings to 63 cents and 4.7% increase in revenues to $73.4 million. Although, the top line failed to meet the Zacks Consensus Estimate, the bottom line surpassed the same.
The company continues to rein in surging demand for its VNS Therapy for the treatment of refractory epilepsy. The continuous solid overseas growth amid several macroeconomic uncertainties in the European market is encouraging. The pipeline development also bolsters confidence. We are impressed with positive data from the ANTHEM-HF study, which entailed Cyberonics' VNS Therapy System being implanted in heart failure patients to evaluate the safety and efficacy of Autonomic Regulation Therapy.
The significant health benefits experienced by the patients who underwent this study further demonstrate the effectiveness of the company's VNS technology platform. We believe this will help Cyberonics gain traction in the drug-resistant epilepsy market. Meanwhile, Cyberonics has been rewarding its shareholders with attractive share repurchases.
The market for epilepsy is huge and still, to a great extent, underpenetrated in the U.S. Recent data revealed that nearly 2.7 million people in the U.S. are afflicted with epilepsy, leading to around 0.4 million potential patients (with drug-resistant epilepsy) for Cyberonics.
Moreover, data shows that a minimum of 0.125 million epilepsy patients are identified each year, which translates into 15,000–24,000 new patients for the company. Cyberonics believes that this rapidly growing market provides huge potential for the company to maintain its growth trajectory.
The Zacks Consensus Estimate for earnings for fiscal 2015 increased 1.3% to $2.37 per share over the last 60 days.
Other Stocks to Consider
Other medical devices companies that are also expected to outperform over the near term are ABIOMED, Inc. (ABMD), Hansen Medical, Inc. (HNSN) and Edwards Lifesciences Corp. (EW). All these stocks carry a Zacks Rank #2.
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