Cyberonics Upped to Buy - Analyst Blog


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On Feb 26, 2014, Zacks Investment Research upgraded Cyberonics Inc. ( CYBX ) - a medical technology company with core expertise in neuromodulation - to a Zacks Rank #2 (Buy). The upgrade came on the back of Cyberonics' recently released quarterly results that exceeded expectations.

Why the Upgrade?

Cyberonics witnessed rising earnings estimates on the back of excellent third-quarter fiscal 2014 results. This Houston, Texas-based company delivered positive earnings surprises in all of the last four quarters with an average beat of 4.36%. The long-term expected earnings growth rate for this stock also stands at an impressive 17.0%.

Over the last few quarters, Cyberonics has performed consistently. In the fiscal third quarter, earnings per share at the company (EPS) rose 8.5% to 51 cents from the year-ago number of 47 cents. The bottom line also beat the Zacks Consensus Estimate by 2 cents. This marked the 11 th successive quarterly earnings beat for Cyberonics.

Revenues increased 8.8% year over year to $68.2 million in the quarter, beating the Zacks Consensus Estimate of $70 million. Growth was aided by solid U.S. and international net product sales. International net sales grossed $15.2 million, up 10% year over year, with a solid 19.8% increase in international unit sales to 1,150 units.Europe and Latin America continued to deliver double-digit growth. In spite of flat unit sales in the U.S., product revenues therein increased 5.3% to $53 million.

The company also continues to witness soaring demand for its VNS Therapy for the treatment of refractory epilepsy. As a major boost in this regard, the company recently achieved CE mark approval for its sixth-generation VNS Therapy generator- AspireSR in Europe. With rising uptake of its VNS therapy across the globe, Cyberonics reiterated its guidance for the ongoing fiscal.

The company still envisages revenues in the range of $281−$285 million. The current Zacks Consensus Estimate of $284 million remains close to the higher end of the company's guidance.  Adjusted income from operations is expected in the range of $86−$88 million, resulting in net income of $55−$57 million and adjusted EPS of $2.00−$2.05 for fiscal 2014. The current Zacks Consensus Estimate for EPS of $2.04 for fiscal 2014 also falls near the upper end of the projected range.

The market for epilepsy is huge and still, to a great extent, underpenetrated in the U.S. Recent data shows that nearly 2.7 million people in the U.S. are suffering from epilepsy leading to around 0.4 million potential patients (with drug-resistant epilepsy) for Cyberonics.

Moreover, data shows that each year a minimum of 0.125 million epilepsy patients are identified, which translates into 15,000-24,000 new patients for the company. Cyberonics believes that this rapidly growing market provides huge potential for the company to maintain its growth trajectory.

Other Stocks to Consider

Other medical devices companies that are also expected to outperform over the near term are Herbalife Ltd. ( HLF ), ABIOMED, Inc. ( ABMD ) and AngioDynamics Inc. ( ANGO ). All these stocks carry a Zacks Rank #2 (Buy).

ABIOMED INC (ABMD): Free Stock Analysis Report

ANGIODYNAMICS (ANGO): Free Stock Analysis Report

CYBERONICS INC (CYBX): Free Stock Analysis Report

HERBALIFE LTD (HLF): Free Stock Analysis Report

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Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Business , Stocks
More Headlines for: EPS , ABMD , ANGO , CYBX , HLF

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