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CryoLife (CRY) Stock Gains 9.5% on Impressive Q1 Earnings

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Shares of CryoLife, Inc. (CRY - Free Report) have gained 9.5% over the past two weeks since the company’s first-quarter 2018 earnings release on May 2.

The stock’s rally post better-than-expected earnings per share (EPS) and revenues reflectsgrowth in all product lines along with strong performance in all geographies. Since the release, the company gained 9.5%, significantly outperforming the industry’s 4.7%.

Let us delve deeper into CryoLife’s earnings details:

 

The company reported adjusted EPS of 2 cents, down 18.2% year over year. However, the figure bettered the Zacks Consensus Estimate of a net loss of 5 cents.

Revenues in Detail

Revenues in the quarter increased 37.3% year over year to $61.9 million. Revenues also trumped the consensus estimate of $60 million,primarily driven by On-X growth. The quarter also saw strength in BioGlue and tissue processing. Moreover, revenues included $14.5-million contribution from the recently-completed acquisition of JOTEC.

On a segmental basis, Product revenues increased 59.1% year over year in the first quarter to $43.6 million. Within the segment, 36.7% of the revenues came from BioGlue and BioFoam followed by 23.6% from On-X.

CryoLife, Inc. Price, Consensus and EPS Surprise

 

Preservation Services revenues increased 4% in the quarter under review from a year ago to $18.4 million. Within the segment, the company witnessed solid growth in Cardiac tissues business.

On a geographical basis, the company’s revenues in the United States rose 4.2% to $34.9 million. International revenues increased 35.7% to $27.1 million.

Operational Update

CryoLife's gross profit in the reported quarter climbed 32.9% year over year to $39.2 million. However, gross margin contracted 210 basis points (bps) to 63.3%. Notably, the gross margins in first-quarter 2018 included a charge of $1.5 million associated with a step-up in basis for JOTEC and inventories from other distributors.

General, administrative, and marketing expenses in the first quarter rose 62.9% year over year to $37.3 million. Research and development expenses shot up 31.7% year over year to $5.4 million. Operating expenses totaled $42.7 million in the first quarter, up 58.1% year over year.

Operating loss in the quarter was $3.5 million, comparing unfavorably to operating profit of $2.5 million in the year-ago quarter.

Financial Update

CryoLife exited first-quarter 2018 with cash and cash equivalents and restricted securities of $27.4 million, compared with $40.8 million at the end of 2017.

2018 Guidance Intact

For 2018, CryoLife continues to expect revenues in the band of $250.0-$256.0 million. The Zacks Consensus Estimate for full-year revenues stands at $258.1 million, above the guided range.

The company also expects adjusted EPS in the range of 29-32 cents. The Zacks Consensus Estimate for earnings is pegged at 30 cents, within the company’s guided range.

Our Take

CryoLife exited first-quarter 2018 on a promising note. We are encouraged to note that the company has been witnessing growth in all product lines along with strong geographic performance. Moreover, the company has been gaining from directly selling the products to end users.

We are also optimistic about the company’s focus on product innovation through R&D and completion of the JOTEC buyout. In this regard, CryoLife is highly upbeat about continuously advancing the clinical development of BioGlueChina and PerClot.

However, escalating operating expenses seem to be discouraging. Also, a tough competitive landscape acts as a dampener.

Zacks Rank & Other Key Picks

CryoLife has a Zacks Rank #2 (Buy).

Other top-ranked stocks in the broader medical space which have reported solid results this season are Intuitive Surgical (ISRG - Free Report) , Chemed Corporation (CHE - Free Report) and Baxter International Inc. (BAX - Free Report) . While Intuitive Surgical sports a Zacks Rank #1 (Strong Buy), Chemed and Baxter carry a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Intuitive Surgical reported first-quarter 2018 adjusted EPS of $2.44, which beat the Zacks Consensus Estimate by 22.6%. Revenues totaled $848 million, also surpassing the consensus estimate by 10.6%.

Chemed released first-quarter 2018 adjusted EPS of $2.72, surpassing the Zacks Consensus Estimate of $2.37. Revenues came in at $439.2 million, beating the Zacks Consensus Estimate of $420 million.

Baxter posted first-quarter 2018 adjusted EPS of 70 cents, which beat the Zacks Consensus Estimate by 12.9%. Revenues of $2.68 billion also edged past the Zacks Consensus Estimate of $2.62 billion.

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