) reached a 52-week high of $39.50 on Tuesday, December 11, 2012.
The medical device stock continues to edge past resistance levels
and soared to another 52-week high. The closing price as of
December 11, 2012 was $39.23, which represented a solid annual
return of about 28%.
The stock carries a short-term Zacks #1 Rank (Strong
A profound mix of solid third quarter earnings, raised
guidance, HeartMate II approval in Japan, expanded geographical
reach and share buybacks are driving the stock price.
With respect to earnings surprise, Thoratec has topped the
Zacks Consensus Estimates in six of the last seven quarters with
an average beat of 14.3%. Its third quarter adjusted earnings per
share of 44 cents easily surpassed the Zacks Consensus Estimate
of 33 cents as well as the year-ago earnings of 34 cents per
Total revenues improved 15% on a year-over-year basis to
$117.8 million in the quarter, surpassing the Zacks Consensus
Estimate of $112 million. Growth was led by higher volume of the
HeartMate II product line (up 27% year over year) as well as the
higher adoption of Destination Therapy (DT) in the domestic
Thoratec 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 the
HeartMate II product line and solid expansion of the ventricular
assist device (VAD) market.
For 2012, earnings per share are expected to be in a band of
$1.79 and $1.83 compared with the prior guidance of $1.67 and
Thoratec continued its momentum in the offshore market,
especially in Western Europe. The company witnessed higher
adoption of its offerings in newer markets like Turkey, where it
expects to capture further market share in the near-term.
) was the first to gain a foothold in Turkey.
Meanwhile, the recent approval of HeartMate II for
bridge-to-transplantation (BTT) in Japan, the second largest
market for medical devices, is a lucrative route to enter the
Asia-Pacific market and garner incremental revenues. The
demographic trends and increasing healthcare expenditure in Japan
should allow for improved growth profile.
Capital allocation in the form of share buybacks should
further boost investor sentiment. Last month, Thoratec announced
a share buyback program of $150 million.
Estimates Inch Up
The Zacks Consensus Estimate for 2012 increased approximately
8.1% to $1.61 per share over the last 60 days. The current
estimate implies year-over-year growth of 16.49%.
For 2013, the Zacks Consensus Estimate rose by 5.1% over the
same time frame to $1.66 per share, implying year-over-year
growth of 3.42%.
Based on 2012 earnings estimates, Thoratec is trading at a
price-to-earnings ratio (P/E) of 24.4x, a 20% premium to the peer
group average of 20.3x. The price-to-sales (P/S) ratio of 4.9x
represents a 39.6% premium to the peer group average of 3.51x.
The company's strong business fundamentals justify the
About the Company
Pleasanton, California-based Thoratec is a leading developer
of innovative devices for advanced heart failure. Founded in
1976, the company has a market capitalization of roughly $2.11
billion. Thoratec has strong presence in the U.S. and Europe with
a first mover advantage in the market it serves.
We currently have a long-term Outperform recommendation on
Thoratec. Medical devices stock carrying a Zacks #1 Rank are
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