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Going by the preliminary results, Volcano Corporation (VOLC - Analyst Report) expects to report revenues of $102.5 million for the fourth quarter of fiscal 2012, up 10% year over year (up 12% at constant exchange rate or CER). However, the result is expected to fall short of the Zacks Consensus Estimate of $106 million. This will result in total revenue of $381.9 million for the fiscal year, up 11% year over year (up 12% at CER), marginally ahead of the Zacks Consensus Estimate of $380 million but within the company’s guided range of $380–$384 million.

Volcano Corporation reported preliminary results ahead of its presentation at the J P Morgan Healthcare conference, held yesterday. The company will come up with the complete results along with the guidance for 2013 in late February.

Revenues in the Medical segment increased 10% (up 12% at CER) during the quarter on the back of a robust 42% increase (up 45% at CER) in FFR (Fractional Flow Reserve) disposable business along with growth across all the key operating regions. Also, the medical disposable business showed encouraging performance with an 11% increase at CER reflecting the value of functional percutaneous interventional (PCI) market development strategies. The Industrial segment recorded revenues of $2.5 million in the fourth quarter, up 63% year over year.

The company is confident about the potential of the intravascular ultrasound (IVUS) and FM (functional measurement) markets based on some favorable trends in the industry in the form of greater clinical and economic pressure to prove the benefits of PCI procedures. By the middle of the decade, the penetration rate of integrated consoles in cath labs is expected to reach 80% or more from the current level of just over 30%. Banking on its ability to reduce costs and continuously upgrade technology, the company is confident of reaping maximum advantage from this lucrative market. Volcano expects its core IVUS and FM businesses to grow over 20% annually coupled with additional revenues from its product pipeline.

Besides, Volcano Corporation has a strong portfolio, which should ensure growth over the long term. Further, pipeline development is also progressing. Based on its direct sales program, the company is growing its market share in Japan at a fast pace and approaching 50% share in this region. Given the termination of several distribution agreements over the past few years, the company is now well placed to address 100% of the business in Japan on a direct basis. Japan continues to be an important IVUS growth opportunity for the company, despite the high penetration level of nearly 80%.

However, capital spending by hospitals has been affected by the weak economy. This has affected PCI volumes in the U.S., Europe and Japan resulting in slower growth of the IVUS disposable business in the recent past. Moreover, unfavorable currency movement continues to be a major headwind for the company. Volcano faces tough competition from Boston Scientific Corporation (BSX - Analyst Report) for the IVUS range of products.

We have a Neutral recommendation on Volcano Corporation. The stock retains a Zacks Rank #3 (Hold).

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