Shares of Cutera (NASDAQ: CUTR) , a laser maker that services the aesthetics market, fell 16% as of 10:50 a.m. EDT on Wednesday. The selling pressure can be traced to second-quarter results and guidance that fell short of expectations.
Here's a look at the key figures from Cutera's second quarter:
- Revenue grew 17%, to $42.6 million. The increase was driven by a 16% sales jump in the states and 19% growth in international markets.
- Gross margin declined by 500 basis points, to 53%. Management blamed the downfall on lower average selling prices on its legacy products and increased sales to distributors.
- Non- GAAP net income was $1.8 million, or $0.12 per share. This figure was well shy of the $0.18 in earnings per share (EPS) that Wall Street was expecting. The miss is partially attributable to the company's lower-than-hoped-for gross margin.
Management also took the opportunity to adjust its guidance for the full year. Here's what the updated expectations look like:
- Revenue is expected to land between $178 million and $181 million. This represents year-over-year growth of 18% to 20%.
- Gross margin is expected to land between 53% to 54%. This is a 400-basis-point reduction from its prior guidance. However, the company stated that it expects gross margin will improve as the year progresses.
- Operating expenses are expected to land between 56% and 57% of total revenue. This is much high than the company's prior guidance range of 52% to 54% of total revenue.
- Non-GAAP earnings per share are expected to land between $0.50 and $0.60. This is a substantial pullback from its prior guidance range of $1.03 to $1.11.
Given Cutera's weaker-than-expected quarterly profitability and substantial reduction in its full-year EPS estimate, it isn't hard to figure out why its stock is selling off today.
Cutera's quarterly results and guidance weren't pretty, but the company's near-term margin problem appears to be fixable. The company also sports a debt-free balance sheet and continues to launch new products that should resonate with the fast-growing aesthetic community .
Overall, I think that long-term bulls continue to have reason to remain optimistic. With shares currently trading at a substantial discount to their 52-week high, right now might be a good time for opportunistic investors to give this stock a closer look.
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