On Jul 8, Zacks Investment Research downgraded
) to a Zacks Rank #4 (Sell).
Why the Downgrade?
Despite several recent strategic initiatives to boost growth,
Cyberonics posted an unimpressive fourth-quarter fiscal 2014 with
earnings in line with the Zacks Consensus Estimate and revenues
missing the same.
Although earnings per share (EPS) rose 19.6% year over year to
55 cents, the results were merely on par with the Zacks Consensus
Estimate. Revenues increased 9.5% year over year to $74.8 million
in the quarter, but missed the Zacks Consensus Estimate of $77
Sales in the U.S. remained sluggish with mere 3.7% growth year
over year. Although gross profit climbed 8.8% year over year, gross
margin of 90.1% in the fourth quarter contracted 61 basis points
(bps) to 90.1%, impacted by the medical device tax and associated
costs effective since Jan 2014.
Also, per management's expectation, fiscal 2014 gross margin
came in at 90.3% representing a downside of about 150 bps from
fiscal 2013 due to the impact of the medical device tax, the
introduction of Cyberonics' tablet programmer and higher costs
associated with the Costa Rica facility. Moving on, the fiscal 2015
gross margin expectation in the range of 90% to 91% also nullifies
any probability of margin improvement in the near term. The CMS
decision on TRD indication also stands as a major downside for the
Overall, an uninspiring performance forced the company to
provide an average revenue and EPS guidance for the next fiscal,
which has naturally failed to boost investor sentiment.
Notably, the Zacks Consensus Estimate for fiscal 2015 earnings
slipped 0.4% to $2.37 per share over the last 30 days. For fiscal
2016, the Zacks Consensus Estimate declined by more than 1.7% to
$2.80 per share.
Other Stocks to Consider
However, some better-ranked stocks in the medical instrument
sector that look promising at the moment are
Intuitive Surgical, Inc.
). While MASI sports a Zacks Rank #1 (Strong Buy), the other two
stocks carry a Zacks Rank #2 (Buy).
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INTUITIVE SURG (ISRG): Free Stock Analysis
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