Texas-based medical device manufacturer
) reported first-quarter fiscal 2015 adjusted earnings per share
(EPS) of 53 cents, reflecting an increase of 17.8% from the
year-ago number. However, adjusted results missed the Zacks
Consensus Estimate by 3 cents.
The year-over-year improvement in earnings was primarily driven
by strong revenue growth and a positive outcome on the operating
However, without taking into consideration the one-time items,
Cyberonics' net income was $13.5 million or 50 cents per share, a
massive jump of 55.6% or 61.3% from the respective year-ago
Cyberonics, Inc - Earnings Surprise |
Quarter in Detail
Revenues increased 4.5% year over year to $72.0 million in the
quarter, but missed the Zacks Consensus Estimate by 2.7%. The
year-over-year growth was aided by strong U.S. net product sales
and unit sales.
In the first quarter, worldwide unit sales increased 5% year
over year to 3,524 units. On a geographic basis, Cyberonics
recorded 4.4% growth in U.S. net product revenues to $58.8 million
and unit sales growth of 2%. International product revenues grew
14.5% at constant exchange rate to $13.2 million with unit growth
of 13.9% amounting to 1,024 units. Foreign exchange movements
favorably impacted international sales for the quarter by $500,000
on a year-over-year basis.
The company witnessed impressive sales growth in Europe and
Latin America. The expanded launch of Cyberonics' AspireSR
generator in the U.K. and Germany was on par with the company's
expectations. The company also experienced an estimated 20% growth
in sale of its VNS Therapy implants in Japan during the reported
Gross profit rose 5.2% to $65.6 million in the quarter.
Consequently, gross margin expanded 60 basis points (bps) to 91.1%
from the year-ago quarter.
In the reported quarter, a 12.7% increase in selling, general
and administrative expenses to $33.0 million and an 11.8% decline
in research and development expenses to $10.6 million led to a rise
of 4.5% in adjusted operating income of $22.0 million. However,
adjusted operating margin remained flat at 30.6% on a
The company exited the quarter with cash and cash equivalents
and short-term investments of $132.7 million, compared with $128.3
million as of Apr 25, 2014. Cyberonics has no interest-bearing debt
on its balance sheet. The company repurchased 189,000 shares in the
first quarter of fiscal 2015. It is now left with 551,000 shares
under its current buyback program. This program is expected to be
completed by the end of fiscal 2015.
Cyberonics reiterated its fiscal 2015 guidance. The company
continues to envisage revenues in the range of $300¬-$307 million,
reflecting annualized growth of approximately 10% (adjusting for
the single country order of $4.7 million and license revenues of
$1.5 million for fiscal 2014). The current Zacks Consensus Estimate
of $304 million falls within the company's guidance. Cyberonics
expects global unit growth of roughly 7%.
Fiscal 2015 EPS continues to be expected in the range of $2.33
to $2.39. The current Zacks Consensus Estimate of $2.37 lies near
the upper end of the guidance range.
The company also expects gross margin in the range of 90-91% and
income from operations in the band of $96-$99 million in fiscal
Cyberonics reported a disappointing first-quarter fiscal 2015
results, with both the top and the bottom line missing the Zacks
Consensus Estimate. However, the company's year-over-year outcome
was impressive on both the earnings and revenue front.
We remain encouraged by Cyberonics' solid foothold in the
drug-epilepsy market, wherein the company achieved notable success,
especially in the European countries and Latin America. Meanwhile,
the company continues to reward shareholders with attractive share
repurchases. However, the company is currently facing headwinds
like fall in new patient activity and constant insurance related
Currently, Cyberonics carries a Zacks Rank #4 (Sell). Some
better-ranked stocks in the medical instruments include Alphatec
Holdings, Inc. (
), RTI Surgical Inc. (
) and Bacterin International Holdings, Inc. (
). While Alphatec and RTI Surgical sport a Zacks Rank #1 (Strong
Buy), Bacterin holds a Zacks Rank #2 (Buy).
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