) second-quarter fiscal 2014 earnings per share (EPS) rose 13.6%
to 50 cents from the year-ago adjusted EPS of 44 cents. The
results also beat the Zacks Consensus Estimate by a penny. This
marks the 10
successive quarterly earnings beat for Cyberonics.
Revenues increased 12.0% year over year to $70.1 million in
the quarter, beating the Zacks Consensus Estimate by a whisker.
Growth was aided by solid U.S. net product sales and unit
Quarter in Detail
In the second quarter, worldwide unit sales increased 8.2%
year over year to 3,496 units. On a geographic basis, Cyberonics
recorded 12.4% growth in U.S. product revenues to $57.9 million
and 8% unit growth in the quarter. According to the company,
domestic product revenues reached a record high in the quarter on
the back of generator ASP growth of 3.8% and increased lead
International product revenues grew 8.5% at constant exchange
rate with unit growth of 9.8%. Foreign exchange movements
favorably impacted sales for the second quarter of fiscal 2014 by
$200,000 on a year-over-year basis. The company witnessed healthy
sales growth in Germany and the U.K., enhanced by solid
performance in Eastern Europe. Among other international regions,
performance in Latin America was also impressive.
During the reported quarter, the company made further progress
with the European approval of its AspireSR generator. Keeping in
line with its expectation, the company made the regulatory filing
of AspireSR generator for European regulatory approval. With this
submission, it anticipates European commercial sales to commence
in a phased launch by the end of the current fiscal. In addition,
the company continued to enroll patients in the first phase of
E-37 U.S. clinical study for the AspireSR generator and expects
to complete enrollment by the end of fiscal 2014.
Gross profit climbed 9.3% to $63.2 million in the quarter.
However, gross margin contracted 167 basis points (bps) to 90.1%,
impacted by the medical device tax and associated costs since Jan
With a 7.5% increase in selling, general and administrative
expenses to $29.6 million and a 16.0% rise in research and
development expenses to almost $11.7 million, adjusted operating
margin contracted 82 bps to 31.2% in the reported
quarter.Although Cyberonics' recorded higher expenditure due to
product development activities, its focus on operating leverage
supported the margin expansion.
The company exited the quarter with cash and cash equivalents
and short-term investments of $122.6 million, compared with
$135.8 million as of Apr 26, 2013. Cyberonics has no
interest-bearing debt on its balance sheet. The company
repurchased almost 0.48 million shares for $25 million during the
quarter and is left with 0.26 million shares under its current
buyback program for the ongoing fiscal.
Cyberonics envisages revenues in the range of $281−$285
million from the earlier range of $279−$283 million. The current
Zacks Consensus Estimate of $283 million remains within the
company's guidance. Cyberonics expects global unit growth of
roughly 10% (unchanged from the earlier guidance).
Adjusted income from operations is expected in the range of
$86−$88 million (from earlier $85−$88 million), resulting in net
income of $54−$56 million ($53−$56 million) and adjusted EPS of
$1.97−$2.03 ($1.93−$2.01) for fiscal 2014. The current Zacks
Consensus Estimate of $2.00 for fiscal 2014 lies within the
Cyberonics reported strong second-quarter results, beating the
Zacks Consensus Estimate on both fronts. The quarterly results
successfully boosted market sentiments too as shares increased
7.5% after the earnings release on Nov 22. A possible explanation
might be the robust growth trend over the past several quarters
coupled with the improved guidance that reflects management's
optimism for the ongoing fiscal.
We are encouraged by Cyberonics' solid foothold in the
epilepsy market and its international business trends. Even amid
a tough macroeconomic backdrop, the company posted strong growth
in Europe. Meanwhile, Cyberonics continues to reward shareholders
with attractive share repurchases.
Currently, the stock carries a Zacks Rank #2 (Buy). Other
MedTech stocks such as
Natus Medical Inc.
) are also worth considering. While Natus Medical carries a Zacks
Rank #1 (Strong Buy), the other two stocks hold the same Zacks
Rank as Cyberonics.
ANGIODYNAMICS (ANGO): Free Stock Analysis
NATUS MEDICAL (BABY): Free Stock Analysis
CRYOLIFE INC (CRY): Free Stock Analysis
CYBERONICS INC (CYBX): Free Stock Analysis
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