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Cardiovascular Systems (CSII) Q2 Earnings Better Estimates

Cardiovascular Systems, Inc.CSII reported earnings per share of 3 cents in second-quarter fiscal 2017, reflecting a massive improvement from the year-ago quarter's loss of 47 cents. Also, earnings compared favorably with the Zacks Consensus Estimate of a loss of 6 cents.

The year-over-year improvement in earnings was primarily backed by revenue growth, better gross margin and lower operating expenses on account of the company's cost realignment actions.

Quarter in Details

Cardiovascular Systems posted revenues of $50.0 million in the fiscal second quarter, marking a year-over-year increase of20.9%. However, revenues were in line with the Zacks Consensus Estimate.

Cardiovascular Systems, Inc. Price, Consensus and EPS Surprise

Cardiovascular Systems, Inc. Price, Consensus and EPS Surprise | Cardiovascular Systems, Inc. Quote

Per management, the strong top-line performance exhibited the company's efforts to stabilize and support its field sales representatives.

During the reported quarter, Cardiovascular Systems sold over 15,000 devices, generating 92% of revenues. The company added 45 new peripheral accounts and 54 coronary accounts.

Coronary device revenues improved 51% year over year to $13 million while peripheral device revenues rose 13% to $37 million. Other product revenues increased 21.4% year over year to $4.0 million. Customer reorder revenues were strong at 98% of total revenue.

Margin

Gross margin in the reported quarter was 81.6%, up 119 basis points year over year, primarily on account of unit cost reductions and slightly higher devices.

Meanwhile, selling and administrative (SG&A) expenses contracted 17.6% to $33.9 million, while research and development (R&D) expenses fell 19.4% to $5.8 million. The resultant adjusted operating expenses declined 17.8% to $39.7 million, primarily exhibiting management's cost realignment initiatives and timing of studies and projects. Consequently, operating profit improved to $1.0 million from a loss of $15.1 million a year ago.

Financial position

The company exited the second quarter of fiscal 2017 with cash and cash equivalents of $79.2 million, reflecting a 36.1% improvement from $58.2 million at the end of first-quarter 2017.

Outlook

Cardiovascular Systems provided its third-quarter fiscal 2017 guidance. The company expects revenues in the range of $50.5-$51.5 million. The current Zacks Consensus Estimate for third-quarter fiscal 2017 revenues stands at $54.8 million, above the company's guidance.

Moreover, the company expects gross profit to account for 81% of revenues and operating expenses of almost $43 million.

The company expects to incur net loss of $1.2-$1.8 million or loss per share of 4-6 cents. The current Zacks Consensus Estimate is pegged at a loss of 3 cents, narrower than the guided range issued by the company.

Our Take

Cardiovascular Systems has delivered impressive second-quarter 2017 results. Additionally, the company's lower operating expenses drove the year-over-year improvement in the earnings figure. Strong revenue performance also contributed to the upside in earnings. Per management, the company delivered improved results over the past four quarters, demonstrating significant progress in driving revenue growth, while moving toward positive cash flow and profitability.

Moreover, demand for the company's Diamondback system under its coronary segment continues to be strong. The company also presented the 30-day favorable results from its LIBERTY 360 study for primary care physicians for dieters and interventionists who treat patients with peripheral vascular disease. The results demonstrated that intervention in Rutherford 2-3 and Rutherford 6 patients may improve outcomes.

Zacks Rank & Other Key Picks

Cardiovascular Systems currently has a Zacks Rank #1 (Strong Buy). Other favorably - ranked medical stocks are Neogen Corp. NEOG , OraSure Technologies, Inc. OSUR and Hill-Rom Holdings, Inc. HRC . All these stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank stocks here.

Neogen gained 27.7% in the past one year, better than the S&P 500's 21.3%. The stock has an impressive long-term earnings growth of 16.7% for the next five years compared to the industry average of 15.2%.

OraSure Technologies surged 65.1% in the last one year in comparison to the S&P 500 mark. The company has a stellar four-quarter average earnings surprise of over 100%.

Hill-Rom Holdings gained 24.9% in the past one year compared to the S&P 500. It has a trailing four-quarter average earnings surprise of 5.9%.

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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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