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Is a Beat in Store for Penumbra (PEN) this Earnings Season?

Penumbra Inc.PEN is slated to release third-quarter 2016 results on Nov 3, after market close. Last quarter, Penumbra posted a positive earnings surprise of 112.5%. The four-quarter average earnings beat is pegged at 128.33%. Let's see how things are shaping up for this announcement.

Why a Likely Positive Surprise?

Our proven model shows that Penumbra is likely to beat earnings because it has the right combination of two key ingredients.

Zacks ESP : Penumbra has an Earnings ESP of +45.46%. That is because the Most Accurate estimate stands at a loss of 6 cents while the Zacks Consensus Estimate is pegged lower at a loss of 11 cents. This is a very meaningful and a leading indicator of a likely positive earnings surprise.

Please check our Earnings ESP Filter that enables you find stocks that are expected to come out with earnings surprises.

Zacks Rank : Penumbra has a Zacks Rank #2 (Buy). Note that stocks with a Zacks Rank #1 (Strong Buy), 2 or 3 (Hold) have a significantly higher chance of beating earnings estimates. Conversely, Sell-rated stocks (Zacks Rank #4 or 5) should never be considered going into an earnings announcement.

The combination of Penumbra's Zacks Rank #2 and +45.46% ESP makes us confident of a positive earnings beat at the company.

PENUMBRA INC Price and EPS Surprise

PENUMBRA INC Price and EPS Surprise | PENUMBRA INC Quote

What's Driving the Better-than-Expected Earnings?

Penumbra's revenue beat estimates and even improved on a year-over-year basis in the second quarter. This is because of the company's stellar performance in both the neuro and peripheral vascular spaces. We expect the strong top-line uptrend to continue in the third quarter as well.

We are also confident about this based on the company's raised 2016 revenue guidance. Penumbra expects revenues in the band of $250 million to $255 million. The current Zacks Consensus Estimate for revenues is pegged at $253.5 million, within the projected range.

We are impressed to note that Penumbra is an active player in the fast-growing interventional therapies space. In fact, the company's products primarily cater to the unmet clinical needs in neuro and peripheral vascular markets.

Meanwhile, consistent growth in neuro franchise is driven by expansion in the ischemic stroke market as well as sales of Penumbra System which includes ACE, ACE64 and ACE68, introduced lately. Accordingly, Penumbra's strategy to focus on impactful product development across a varied portfolio may boost investors' confidence on the stock.

Also, Penumbra garners considerable revenue from its peripheral vascular business. We believe that slow but increasing demand for treatment options in the heart diseases market reflects the high growth potential for the company in this niche.

However, foreign exchange headwind and intense competition from major commercial laboratories and hospitals continue to raise caution.

Stocks to Consider

Here are some companies you may want to consider as our proven model shows they have the right combination of elements to post an earnings beat in the upcoming quarter:

Glaukos Corporation GKOS has an earnings ESP of +200% and a Zacks Rank #1.

Invuity, Inc. IVTY has an earnings ESP of +1.61% and a Zacks Rank #2. You can see the complete list of today's Zacks #1 Rank stocks here

Accelerate Diagnostics AXDX has an earnings ESP of +2.94% and a Zacks Rank #3.

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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 Nasdaq, Inc.


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

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