On Nov 11, 2014, Zacks Investment Research downgraded Thoratec Corp. (THOR) to a Zacks Rank #5 (Strong Sell).
Why the Downgrade?
Thoratec’s dismal third-quarter 2014 results were the primary reason behind the downgrade. Adjusted earnings of 8 cents per share missed the Zacks Consensus Estimate by a penny and declined nearly 80% on a year-over-year basis, owing to a 16.3% fall in revenues.
The revenue drop was primarily due to the decline in HeartMate II sales, partially offset by continued double-digit revenue growth in the CentriMag business. Third-quarter revenues of $105.8 million also lagged the Zacks Consensus Estimate of $108 million.
The company also slashed its adjusted earnings and revenue guidance owing to lower assumptions for HeartMate II product line on the back of near-term challenges. Thoratec anticipates higher operating expenses in the fourth quarter of 2014 due to accelerated clinical trial activity, targeted commercial investments, and product development project expenses.
2015 is anticipated to be a transition year for Thoratec as it seeks to reaccelerate market growth.
Owing to the present headwinds, analysts remain reasonably apprehensive, as is evident from the downward estimate revisions. Over the last 7 days, the Zacks Consensus Estimate fell 14.4% (13 cents) to 77 cents per share for full year 2014 while the same for 2015 declined 10.7% (11 cents) to 92 cents.
Stocks to Consider
While we choose to avoid Thoratec at present, better-ranked stocks include AngioDynamics Inc. (ANGO), ABIOMED, Inc. (ABMD) and Edwards Lifesciences Corp. (EW). While AngioDynamics sports a Zacks Rank #1 (Strong Buy), ABIOMED and Edwards Lifesciences hold a Zacks Rank #2 (Buy).
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