), a leader in mechanical circulatory assistance devices, reached a
52-week high on December 12 and became a Zacks #1 Rank (Strong Buy)
on November 20. The company has reported positive earnings
surprises in five of the last six quarters with an average beat of
15.6%. In its most recent report, THOR enhanced its revenue and EPS
guidance for the year.
Strong Third Quarter
On November 1, Thoratec reported third quarter adjusted earnings
per share of 44 cents, surpassing the Zacks Consensus Estimate by
33.3% and the year-ago earnings by 29.4%. Net income from
continuing operations soared 27.7% year over year to $24.3 million.
Revenues improved 15% year over year to $117.8 million, beating the
Zacks Consensus Estimate by 5.4%. The improvement was based on
higher volume of the HeartMate II product line (up 27% year over
year), as well as the development of Destination Therapy (DT) in
the domestic market. Geographically, domestic sales surged 16% year
over year to $97.5 million while overseas revenues increased 9% to
HeartMate sales jumped 21% to $105.9 million. Thoratec pump sales
were up 17.7% year over year to $85 million while non-pump revenues
advanced 8.1% to $32.2 million. Unit sales of pumps in the U.S.
increased 17.4% to 781 units, while overseas sales were up 10.6% to
On an adjusted basis, gross margin decreased to 71.4% from 71.6% in
the prior-year quarter on account of foreign currency fluctuations.
Thoratec now expects revenues between $477 million and $483 million
for 2012, compared with the prior guidance range of $460 million to
$470 million. The updated guidance includes higher sales estimates
for the HeartMate II product line and solid expansion of the
ventricular assist device (VAD) market.
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
between $1.79 and $1.83, compared with the prior guidance of $1.67
Earnings Estimates on the Rise
All four estimates for 2012 have been revised higher in the last 60
days, which has boosted the Zacks Consensus Estimate by 8.1% to
$1.61. This represents earnings growth of 16.5%.
All four estimates for 2013 have also been revised upward in that
time, raising the Zacks Consensus Estimate by 5.1% to $1.66,
reflecting an implied growth rate of 3.4%.
On December 11, 2012, Thoratec revealed that it was granted
approval by the Japanese Ministry of Health, Labour and Welfare to
commercialize HeartMate II for bridge to transplantation (BTT)
purposes for victims of advanced heart failure.
HeartWare International Inc. (
), a global provider of miniaturized VAD for advanced heart
failure, disclosed on November 20 that the U.S. Food and Drug
Administration (FDA) has granted clearance for its HeartWare
Ventricular Assist System as a bridge to heart transplantation
device for patients with end-stage heart failure. However, there is
no imminent competitive threat for Thoratec from HeartWare in the
DT segment, as the product from the latter is not expected to be
launched in the immediate future. We believe that DT will account
for the major part of growth in the VAD market.
Thoratec trades at a premium to its peers by most metrics, such as
price-to-earnings and price-to-book. The stock is currently trading
at a forward P/E of 24.4, an 18.7% premium to the peer group
average of 20.6. The price-to-book of 3.4x is marginally higher
that the peer group average of 3.3x. The trailing twelve-month
return on investment of 14.9% is slightly lower than the peer group
average of 15.8%.
Thoratec's price performance has been fairly strong. The stock is
currently trading above both its 50- and 200-day moving averages.
Thoratec has rallied 26.5% over the past year compared with a 13.8%
increase of the S&P 500.
Based in Pleasanton, California, Thoratec manufactures and sells a
wide range of mechanical circulatory assistance devices to meet the
clinical requirements of victims of advanced heart failure. Its
product range includes Thoratec VAD and HeartMate LVAS (Left
Ventricular Assist System). The company has a market cap of $2.31
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