Back to top

Image: Bigstock

Penumbra (PEN) Q1 Loss Wider than Expected, View Intact

Read MoreHide Full Article

Penumbra, Inc. (PEN - Free Report) , that went public in Sep 2015, reported first-quarter 2017 loss per share of 10 cents, comparing unfavorably with earnings of 7 cents in the year-ago quarter. The loss figure was also wider than the Zacks Consensus Estimate of a loss of 6 cents.

Revenues in Details

Revenues in the reported quarter rose 26.4% year over year (up 27% at constant exchange rate or CER) to $73.2 million, steering past the Zacks Consensus Estimate of $72 million.

On a geographic basis, first-quarter revenues in the U.S. (representing 66.2% of total sales) grossed $48.5 million, up 23% from the year-ago quarter figure and 23.0% at constant exchange rate or CER. Meanwhile, International sales (33.8% of total sales) advanced 33.6% year over year (up 35.5% at CER) to $24.7 million.

Penumbra, Inc. Price, Consensus and EPS Surprise

 

Penumbra, Inc. Price, Consensus and EPS Surprise | Penumbra, Inc. Quote

Going by product category, revenues from neuro products grew 21.7% (or up 22.3% at CER) to $50.2 million in the first quarter of 2017. Revenues from peripheral vascular product business rose to $23.0 million in the first quarter, reflecting an increase of 38% (or up 38.7% at CER) year over year.

Neuro growth was primarily driven by sales of its ACE68 reperfusion catheter, which is part of Penumbra System for ischemic stroke. Management also witnessed strong growth contribution from access as well as embolization product families. Within the neuro franchise, Penumbra received FDA clearance for its 3D revascularization device. Also, during the first quarter, the company launched a latest addition to the SMART Coil family. Growth in peripheral was driven by Penumbra’s Indigo suite in peripheral thrombectomy.

Operational Update

Penumbra’s first-quarter gross margin was 65.2%, reflecting a 373-basis point (bps) contraction year over year, on account of a 41.5% rise in gross profit.

Research and development expenses totaled $7.0 million, up 40.1%, while sales, general and administrative expenses amounted to $42.7 million, up 29.2% year over year. The expenses primarily rose on the back of personnel-related expenses, resulting from increased headcount to support continued investment in products, as well as increased product development, testing and trial expenses.

Furthermore, loss from operations came in at $2.0 million, highlighting a massive decline from the operating income of $1.8 million in the prior-year quarter. The company’s operating margin also declined 2.7%, reflecting a contraction of as much as 596 bps.

Financial Update

Penumbra exited the first quarter of 2017 with cash and cash equivalents of $109.3 million, up from $13.2 million recorded at the end of full year 2016.

2017 Outlook Reiterated

Penumbra maintains its total revenue 2017 guidance at the range of $312 million to $317 million, which represents revenue growth of almost 20% over full-year 2016. Moreover, the Zacks Consensus Estimate for revenues is pegged at $318.4 million, which is above the guided range.

Our Take

Penumbra exited first-quarter 2017 on a solid note, with the company reporting impressive top and bottom-line results. Although, the year-over-year comparison of earnings was unfavorable, the company witnessed strong growth across all its geographies and product lines. However, escalating costs and expenses exerted pressure on margins.

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 across two major markets – neuro and peripheral vascular.

In fact, rising demand for treatment options in the heart disease market reflects the high-growth potential in this niche. Also, attractive growth opportunities exist for Penumbra in the ischemic stroke market as well as in the more established markets like hemorrhagic stroke and peripheral vascular. Accordingly, Penumbra’s strategy is to focus on product development and innovation, which raise investors’ confidence in the stock.

Zacks Rank & Key Picks

Penumbra currently has a Zacks Rank #4 (Sell). Better-ranked medical stocks include Baxter International Inc. (BAX - Free Report) , Hologic Inc. (HOLX - Free Report) and Bio-Rad Laboratories, Inc. (BIO - Free Report) . Baxter International sports a Zacks Rank 1 (Strong Buy), while Hologic and Bio-Rad Laboratories carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Baxter International rose around 21.0% in the last one year, in comparison to the S&P 500’s 16.1%. It has a four-quarter average earnings surprise of 17.14%.

Hologic gained 33.4% in the last one year, in comparison to the S&P 500’s. The company has a stellar four-quarter average earnings surprise of over 4.16%.

Bio-Rad Laboratories gained 57.2% in the past one year, better than the S&P 500 mark. It has a four-quarter average earnings surprise of 13.10%.

Looking for Ideas with Even Greater Upside?

Today's investment ideas are short-term, directly based on our proven 1 to 3 month indicator. In addition, I invite you to consider our long-term opportunities. These rare trades look to start fast with strong Zacks Ranks, but carry through with double and triple-digit profit potential. Starting now, you can look inside our home run, value, and stocks under $10 portfolios, plus more. Click here for a peek at this private information >>

Published in