Abiomed Inc. ABMD reported impressive fourth-quarter fiscal 2015 results, with both earnings and revenues crushing their respective Zacks Consensus Estimate. Fourth-quarter earnings of 28 cents per share cruised past the Zacks Consensus Estimate of 12 cents and exceeded the year-ago equivalent of 9 cents, riding on strong revenue growth.
Quarter Details
Revenues in the quarter grossed $67.6 million, outpacing the Zacks Consensus Estimate of $62 million. Revenues surged nearly 34.4% year over year driven by robust performance from the Impella product line. On a constant currency (cc) basis, revenues increased 36%.
Globally, Impella revenues grew 38% to $63.4 million in the quarter. U.S. Impella revenues grew 38% to $57.7 million while outside the U.S., Impella revenues shot up 30% (56% at cc) to $5.7 million.
Abiomed revealed that an additional 27 hospitals purchased Impella heart pumps during the quarter, bringing the installed customer base to 958 sites. As part of Abiomed's continued Impella CP(R) launch, 57 hospitals purchased Impella CP during the quarter, bringing the total number of Impella CP U.S. sites to 640.
Gross margin expanded 410 basis points (bps) to 84%, primarily led by higher unit catheter revenue, increased production volume and a weaker Euro.
Costs and expenses, as a percentage of revenues, contracted 11% year over year to 78%. This was primarily due to 410 bps, 110 bps and 580 bps decline in cost of products, research & development (R&D), and selling, general & administrative (SG&A) expenses, respectively.
Consequently, the operating margin surged 11% on a year-over-year basis to 18.3% on lower expenses and higher gross margin base.
Abiomed had cash, cash equivalents and marketable securities of $132 million as of Mar 31, 2015, significantly higher than $76.6 million as of Mar 31, 2014. The company had no debt at the end of the quarter.
Fiscal 2016 Outlook
Abiomed raised its fiscal 2016 revenue guidance. The company now expects revenues in the range of $285–$295 million (up from the earlier guided $260–$270 million). The upgraded guidance reflects year-over-year revenue growth of 24% to 28% and includes approximately $4–$6 million of revenue from the launch of Impella RP.
For fiscal 2016, the company raised its gross margin guidance to a range of 83%–85% from the previous expectation of 80%–82%. R&D expense is expected to remain at approximately 15% of revenue for the year.
Abiomed projects operating margin in the band of 12% to 16%.
Our Take
We are impressed with Abiomed’s fourth-quarter results, which reflect robust revenue and earnings growth on the back of higher volumes, operational efficiency and margin expansion. The company raised its fiscal 2016 revenue guidance which is a major positive in our view.
The company’s Impella utilization is growing at a remarkable pace with an increasing number of hospitals and customer sites purchasing the same.
We note that Abiomed plans to invest roughly $15 million to $20 million to expand its facilities in Massachusetts and Germany to support additional manufacturing capacity and growth in the operational support infrastructure. We believe that this will help the company to eliminate any risk of limitation in the supply chain and meet the growing demand for its offerings.
Stocks to Consider
Currently, Abiomed carries a Zacks Rank #2 (Buy).
Some other favorably-ranked stocks in the medical instruments industry are Inogen INGN, RTI Surgical RTIX and Thoratec Corp. THOR. All these stocks carry the same Zacks Rank as Abiomed.
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