) reached a 52-week high of $38.12 on Friday, November 2, 2012.
The closing price of this medical device stock as of November 2,
2012 was $36.62, which represented a solid year-to-date return of
Moreover, the company has delivered positive earnings surprises
in six of the last seven quarters with an average beat of 14.3%.
Several factors such as solid performance in the third quarter,
raised guidance, attractive opportunity in the Destination
Therapy (DT) market and growth opportunities in the international
markets, are driving the stock price.
On November 1, 2012, Thoratec reported third quarter 2012
adjusted earnings per share of 44 cents, easily surpassing the
Zacks Consensus Estimate of 33 cents as well as the year ago
earnings of 34 cents per share. Revenues improved 15% year over
year to $117.8 million in the quarter, beating the Zacks
Consensus Estimate of $112 million.
Growth was led by higher volume of HeartMate II product line (up
27% year over year) as well as the development of DT in the
domestic market in which Thoratec enjoys market monopoly.
Geographically, domestic sales surged 16% year over year to $97.5
million, while overseas sales increased 9% to $20.3 million. The
contagion of economic problems in Europe did not have any
significant impact on the most recent quarter's performance.
Further, Thoratec continues its robust performance in the
international market, especially Western Europe. The company also
attempts to expand its geographical foothold and explore newer
markets for its offerings. Additionally, after the reimbursement
approval in Japan (expected in the ongoing quarter), the company
will be able to serve one of the largest focus markets for its
Thoratec has revised its financial forecast for 2012. The company
expects revenues between $477 million and $483 million compared
with the prior guidance of $460 million and $470 million. The
updated guidance includes higher sales estimates for HeartMate II
product line and solid expansion of the ventricular assist device
For 2012, earnings per share (on a reported basis) are now
projected in the range of $1.40 to $1.44 compared to the prior
guidance of $1.28 to $1.34 while adjusted earnings are expected
to be in a band of $1.79 and $1.83, compared with the prior
guidance of $1.67 and $1.73.
The company is currently developing its HeartMate III and targets
CE Mark approval in Europe (expected in mid 2013) followed by
clinical trials in the U.S. before the end of 2013. Next
generation HeartMate devices are expected to be accretive to the
company's growth in the long-term.
However, its dominance in the bridge-to-transplant (BTT)
indication will be challenged following the prospective approval
) Ventricular Assist System later this year. Australian heart
pump maker HeartWare is expected to close the technology gap with
the launch of its next generation VAD product.
Earnings Estimate Revisions
The Zacks Consensus Estimate for fiscal 2012 increased
approximately 24.5% to $1.81 per share over the last 7 days. The
current estimate implies year-over-year growth of 31.16%.
For fiscal 2013, the Zacks Consensus Estimate remained unchanged
at $1.58 per share, implying year-over-year decline of 12.85%.
The company's strong fundamentals justify the premium valuation
of the stock. Thoratec currently trades at a forward P/E of
24.2x, a 17% premium to the peer group average of 20.68x.
Moreover, the price-to-sales ratio of 4.5x is at a 18.7% premium
to the peer group average of 3.79x.
Thoratec has a trailing 12-month ROE of 14.5% compared with the
peer group average of 15.1%.
About the Company
California-based Thoratec is a leading developer of innovative
devices for advanced heart failure. Founded in 1976, the company
offers employment to about 800 people worldwide. With a market
capitalization of roughly $2.11 billion, Thoratec owns
manufacturing facilities across the U.S., U.K. and Switzerland.
We currently have a long-term Outperform recommendation on
Thoratec. The stock retains a Zacks #3 Rank, which translates
into a short-term Hold rating.
HEARTWARE INTL (HTWR): Free Stock Analysis
THORATEC CORP (THOR): Free Stock Analysis
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