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What's in Store for Penumbra (PEN) Stock in Q3 Earnings?

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Penumbra, Inc. (PEN - Free Report) is expected to report third-quarter fiscal 2017 results on Nov 11. The company delivered a positive earnings surprise of 7.6% for three of the trailing four quarters. Let's see how things are shaping up for this announcement.

Catalysts

Over the past few quarters, Penumbra showcased strong top-line performance on consistent growth in its neuro and peripheral vascular arms. The company is presently focusing on driving innovation, product development and geographic expansion. This is expected to help Penumbra maintain the bullish growth trend in the to-be-reported quarter.

It is to be noted that neuro growth was mainly driven by sales of the Penumbra system for ischemic stroke. The company witnessed increased sequential growth on higher procedural volumes. However, the company expects to see seasonality in the neuro business in the third quarter.

Also, peripheral vascular growth was driven by the Indigo family and peripheral thrombectomy along with the Coil portfolio in peripheral embolization.

The Zacks Consensus Estimate for neuro revenues of $54 million reflects an increase of 13.6% from the year-ago-quarter. The Zacks Consensus Estimate for peripheral vascular revenues of $24.6 million shows a rise of 25.2% from the year-earlier quarter.

Penumbra, Inc. Price and EPS Surprise

 

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

 

Overall, fiscal third-quarter total revenues are projected at $79 million, up 17.9% from the prior-year quarter.

Here are the other factors that might influence Penumbra’s third-quarter results:

Penumbra has been delivering strong performance in both domestic and international markets on the back of solid contributions from its neuro business. We expect the trend to continue in the yet-to-be-reported quarter.

In second-quarter 2017, gross margin deteriorated and operating expenses increased. According to the company, increased compensation expenses related to growth in headcount and higher clinical trial expenses resulted in operating loss in the quarter. We expect escalating costs and expenses to continue to keep margins under pressure in the third quarter.

Meanwhile, research and development expenses increased 29.2% in the second quarter. With the company remaining focused on product launches, we expect expenses to remain high in the third quarter.

Further, foreign exchange fluctuations and stiff competition from major commercial laboratories and hospitals continue to raise caution.

Overall, the company expects revenues to decline sequentially in the third quarter owing to seasonality in summer. The company expects to report revenues in the band of $312-$317 million.

Here is what our quantitative model predicts:

Penumbra has the right combination of two main ingredients — a positive Earnings ESP  and a favorable Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) — for increasing the odds of an earnings beat. You can see the complete list of today’s Zacks #1 Rank stocks here.

Zacks ESP: The Earnings ESP for Penumbra is +31.82%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Penumbra’s Zacks Rank #3 increases the predictive power of ESP.

However, the Zacks Consensus Estimate of a loss of 7 cents is wider than the loss of 4 cents reported in the year-ago quarter.

Stocks Worth a Look

Here are a few medical stocks worth considering as they have the right combination of elements to post an earnings beat this quarter.

The Cooper Companies, Inc. (COO - Free Report) has an Earnings ESP of +0.43% and a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Thermo Fisher Scientific Inc.(TMO - Free Report) has an Earnings ESP of +0.19% and a Zacks Rank #2.

Align Technology, Inc. (ALGN - Free Report) has an Earnings ESP of +0.74% and a Zacks Rank #3.

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