On Feb 26, 2014, Zacks Investment Research upgraded
) - 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
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
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
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
). All these stocks carry a Zacks Rank #2 (Buy).
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