Volcano Corp. Poised on Strong IVUS Portfolio - Analyst Blog


On Jul 11, we issued an updated research report on Volcano Corporation ( VOLC ) - a leading precision guided therapy tools provider. The company continues to maintain its leading position in the intravascular ultrasound (IVUS) markets of U.S., Japan and Europe, translating into a 50% hold of the global market share.However, the current market scenario continues to remain challenging for Volcano.

The final reimbursement reduction in Japan resulted in an approximate 5% decline in Imaging Disposables and around 2% cut in fractional flow reserve (FFR) disposables of Volcano Corp. These reimbursement cuts will be in effect for the next two years. In addition, the Japanese government has mandated a 3% consumption tax increase in addition to the reimbursement cuts. This has led to a 7.5% reimbursement decline beginning Apr 2014, in line with the company's expectation.

Amid a challenging macro-economic scenario, Volcano Corp. posted a dismal first quarter of 2014 along with a dismal 2014 guidance. The first-quarter adjusted net loss of $0.12 was 9.1% wider than the Zacks Consensus Estimate and way below the year-ago reported earnings of $0.02.Although, revenues climbed 4% year over year at CER to $94.5 million, it missed the Zacks Consensus Estimate of $96 million.

Volcano Corp. derives a major portion of its revenues from its IVUS product portfolio which continues to demonstrate strong growth. In the last reported quarter, the IVUS improvement was buoyed by market share gains across Volcano Corp.'s key geographic locations barring Japan, and over 20% growth in the U.S. peripheral IVUS business. The company exhibited a solid 10% IVUS growth in Europe and a 22% rise in Rest of the World.

Currently, more than 3.1 million procedures are performed globally in this market which has an imaging penetration of less than 3%.Given the low penetration rate, Volcano Corp. expects the U.S. peripheral IVUS business to grow in the high teens over the upcoming period. Also, FFR disposable revenues managed to show healthy growth.We are also optimistic about the favorable industry trends which should lend positive momentum to Volcano Corp.

The stock currently carries a Zacks Rank #3 (Hold).

Other Stocks to Consider

Some better-ranked stocks in the medical instrument sector that look promising at the moment include Masimo Corp. ( MASI ), Hologic Inc. ( HOLX ) and Intuitive Surgical, Inc. ( ISRG ). While MASI sports aZacks Rank #1 (Strong Buy), the other two stocks carry a Zacks Rank #2 (Buy).

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VOLCANO CORP (VOLC): Free Stock Analysis Report

INTUITIVE SURG (ISRG): Free Stock Analysis Report

HOLOGIC INC (HOLX): Free Stock Analysis Report

MASIMO CORP (MASI): Free Stock Analysis Report

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

This article appears in: Investing , Business , Stocks

Referenced Stocks: FFR , VOLC , ISRG , HOLX , MASI



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