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What's in Store for Penumbra (PEN) This Earnings Season?

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Penumbra, Inc. (PEN - Free Report) is expected to report second-quarter 2018 results on Aug 7, after market close.

Last reported quarter, the company posted a positive earnings surprise of 400%, reporting adjusted earnings per share of 6 cents against the Zacks Consensus Estimate of a loss of 2 cents. Moreover, Penumbra has outperformed the Zacks Consensus Estimate in three of the preceding four quarters, the average beat being 403.6%.Let’s take a look at how things are shaping up prior to this announcement.

Catalysts

Continued Uptake of Penumbra System: Over the past few quarters, Penumbra showcased consistent growth in neuro arm banking on strong uptake  of the Penumbra system for ischemic stroke. In the last-eported quarter, the company witnessed increased sequential growth on higher procedural volumes. Moreover, the company is actively implementing marketing strategies. Further, Penumbra is gaining from the extension of the stroke-treatment window from 6 to 24 hours. This in turn has led to an increase in the number of patients eligible for treatment. This trend is expected to be reflected in second-quarter 2018 results as well. The Zacks Consensus Estimate for Neuro revenues of $71 million reflects 26.8% growth over the year-ago period.

Penumbra, Inc. Price and EPS Surprise

 

 

Favorable Neuro Business Trend: Management seems impressed with the internal efforts to generate awareness in the domestic region. It also appears upbeat about increased cooperation among hospitals to handle stroke cases. Also, larger hospital systems are investing to increase the strength of new centers. The company is also upbeat about the passage of a bill by the Tennessee State Legislature in March. The bill is focused on helping direct emergency medical services to analyze, treat and transport patients to the best stroke center in a time-efficient manner. Notably, Penumbra expects the bill to be signed into law in the near term. However, management is little cautious about the growth trend, which might remain uneven in the coming quarters.

Strategies Buoy Optimism: The company is presently focusing on driving innovation, product development as well as geographic expansion. In this regard, Penumbra presented results from an independently-conducted COMPASS Trial and the company-sponsored PROMISE Study focused on Penumbra’s aspiration thrombectomy system for ischemic stroke revascularization. Moreover, we are encouraged by the strong uptake of the company’s newly-launched 3D Revascularization Device, a technologically advanced stroke device developed for efficient aspiration with ACE Reperfusion Catheters.

Growing Peripheral Vascular Business: The Peripheral Vascular portfolio comprising Indigo System, embolization platform including RUBY Coil, POD (Penumbra Occlusion Device) and POD Packing Coil, along with LANTERN microcatheter is quite strong. Moreover, the company has been witnessing solid contribution from this segment over the past few quarters and the momentum is expected to continue this earnings season. Further, the company is upbeat about the solid inclination demonstrated for Indigo at the Society of Interventional Radiology Meeting at the end of the previous quarter.

Per management, growth in this business continues to be led by new physician customer addition and widening use of Indigo. Furthermore, the consensus estimate for Peripheral Vascular revenues of $31.3 million reflects 28.3% growth over the year-ago period.

Strong Geographical Performance: Penumbra has been delivering sturdy performance in both the domestic and international markets by reaping benefits from neuro business. We expect this trend to continue in the soon-to-be-reported quarter as well.

Rising Operating Expenses: In recent times, the company witnessed a rise in operating expenses.In the last-reported quarter, research and development expenses increased 13.9%whereas sales, general and administrative expenses were up 27.6% year over year. With the company remaining focused on product launches, we expect second-quarter results to show high expenses.

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

Overall, the Zacks Consensus Estimate for second-quarter revenues of $102.2 million reflects a 26.9% rise from the prior-year quarter.

Here’s What the Quantitative Model Predicts:

Per the proven Zacks model, a company with a favorable Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has higher chances of beating estimates if it also has a positive Earnings ESP.

Penumbra has a Zacks Rank #3, which increases the predictive power of ESP. However, the company’s Earnings ESP of 0.00% leaves our surprise prediction inconclusive. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

The Zacks Consensus Estimate for second-quarter earnings per share of 3 cents reflects a 160% improvement from the prior-year quarter.

Stocks Worth a Look

Here are a few stocks worth considering with the right combination of elements to beat estimates this time around.

National Vision Holdings, Inc. (EYE - Free Report) has an Earnings ESP of +2.70% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank Stocks Here.

Ardelyx, Inc. (ARDX - Free Report) has an Earnings ESP of +6.17% and a Zacks Rank of 2.

Natera, Inc. (NTRA - Free Report) has an Earnings ESP of +21.15% and is a Zacks #2 Ranked player.

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