We recently maintained our Outperform recommendation on
Cyberonics
(
CYBX
), a major neuromodulation company, with a target price of
$63.00.
The recommendation is primarily based on the company's strong
future growth prospects. Over the last few quarters,
Cyberonics has consistently delivered strong results through
balanced sales growth worldwide. In the last-reported quarter,
total sales increased a robust 17% year over year to $63.0
million and adjusted earnings grew 37.5% to 44 cents per share.
The results surpassed the Zacks Consensus Estimates of $60
million and $0.39, respectively.
The upside in revenues (representing the second successive
quarter of over $50 million sales) was primarily attributable to
robust growth in the U.S. epilepsy device sales (increasing by
16%) and unit sales (by 12.3%). The redesigned AspireHC generator
that received FDA approval in January 2012, comprised 17% of the
U.S. generator unit sales in the reported quarter. Over 77% of
the U.S. generator sales came from Demipulse and AspireHC. We
expect all these product lines to boost Cyberonics' top-line
performance in the upcoming quarters.
After a couple of quarters of sluggish international sales,
the company recorded robust sales growth of 28.3% in this region,
favorably impacted by double-digit sales growth in Europe,
increased shipments to Japan as well as improved sales in all
other international regions. Cyberonics remains positive about
its initiatives to invest in market development and achieve new
patient and replacement cycle growth in Europe and Japan, which
are expected to further improve the company's performance in
these regions.
In Europe, the company's increased investments and
organizational changes have proved helpful, which was reflected
in the double-digit growth in overall performance for the third
consecutive quarter. Moreover, the company deployed senior sales
and marketing teams from the U.S. in Europe and Japan to
strengthen the organization. Cyberonics expects all these
initiatives to improve its international performance for the rest
of fiscal 2013.
Cyberonics is also focusing on strengthening its pipeline. The
company is currently working on the development of future
generations of the Vagus Nerve Stimulation (VNS) Therapy System,
which includes generators that utilize cardiac and brain-based
seizure detection stimulation paradigms, rechargeable battery
technology, wireless communication technology and improved lead
technology.
We remain concerned about the challenging macroeconomic
scenario and competitive pressures from players like
Medtronic
(
MDT
) and
St. Jude
(
STJ
) in the neuromodulation space. However, considering the
advantages of the VNS therapy system and the strong untapped
potential in the epilepsy market, we are optimistic about the
growth prospects of the company.
Cyberonics carries a Zacks #2 Rank (Buy) in the short
term.
CYBERONICS INC (CYBX): Free Stock Analysis
Report
MEDTRONIC (MDT): Free Stock Analysis Report
ST JUDE MEDICAL (STJ): Free Stock Analysis
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