AngioDynamics Q3 Earnings Flat but Beat Ests - Analyst Blog

AngioDynamics Inc. ANGO reported flat adjusted earnings per share of 16 cents for the third quarter of fiscal 2014 ended Feb 28, 2014 compared with the same quarter a year ago. Earnings per share, however, comfortably exceeded the Zacks Consensus Estimate of 10 cents. Adjusted net earnings inched up 0.6% to $5.6 million from $5.5 million a year ago.

Revenues in the quarter went up 8.1% to $88.2 million from $81.6 million in the year-ago quarter, edging past the Zacks Consensus Estimate of $87 million. The top line growth was driven by double-digit sales growth in the Peripheral Vascular and Oncology/Surgery businesses and a significant turnaround in Vascular Access business brought about by the success of ANGO's BioFlo products.

Excluding the planned termination of the supply agreement with Boston Scientific Corp. BSX, revenues were up 9% to $86.6 million from $79.5 million in the comparable prior-year period.

Revenues from the Peripheral Vascular business were up 11.2% to $47.4 million, Vascular Access business edged up 3.3% to $27.3 million, and Oncology/Surgery business grew 14.5% to $12.0 million. However, revenues from the Supply Agreement business plunged 26% to $1.6 million from the year-ago quarter.

Geographically, revenues in the U.S. grew 9.5% to $69.9 million during the quarter while international revenues rose 7.0% year over year to $16.8 million.

ANGO reported a 10.8% rise in gross profit to $45.6 million compared with $41.2 million in the year-ago quarter. Consequently, gross margin increased 120 basis points (bps) to 51.7% from 50.5% a year ago.

Adjusted operating earnings increased marginally by 1.5% to $10.8 million from $10.6 million a year ago. However, adjusted operating margin dipped 80 bps to 12.2% from 13.0% in the comparable fiscal 2013 quarter.

Third-quarter EBITDA more than doubled to $14.0 million from $6.5 million in the year-ago quarter. Adjusted EBITDA went up 6.6% to $14.6 million from $13.7 million in the year-ago period.

Financial Position

As of Feb 28, 2014, ANGO had cash and cash equivalents of $7.4 million, down significantly by 66.1% from $21.8 million as of May 31, 2013. Long-term debt declined to $139.0 million as of Feb 28, 2014 compared with $142.5 million as of May 31, 2013. As a result, long-term debt-to-capitalization ratio decreased 80 bps to 20.5% from 21.3% as of May 31, 2013.

In the first nine months of fiscal 2014, cash flow from operating activities dropped 2.2% to $15.2 million from $15.5 million in the same period of fiscal 2013. The decline was mainly due to the ERP implementation undertaken by the company during the quarter, leading to some operational volatility. Capital expenditure rose 16.8% to $9.0 million in the period from $7.7 million incurred a year ago.

Guidance

Given the strong sales performance in the first nine months of fiscal 2014, ANGO raised its revenue guidance to a range of $351 to $355 million for fiscal 2014 from the prior range of $349 to $353 million. The Zacks Consensus Estimate of $353 million lies within the company's guided range.

ANGO lowered its adjusted earnings per share guidance for fiscal 2014 to a range of 60 to 63 cents from the prior range of 63 to 67 cents mainly due to its current product and geographic mix, as well as unanticipated costs related to the recent Medcomp agreement. Nevertheless, the guided range is significantly higher than the Zacks Consensus Estimate of 33 cents for fiscal 2014.

For the fourth quarter of fiscal 2014, ANGO anticipates revenues between $91 and $95 million. The Zacks Consensus Estimate of $93 million lies within the company's guided range. Adjusted earnings per share for the quarter is expected in the range of 18 to 21 cents which is notably higher than the Zacks Consensus Estimate of 13 cents.

Operational Update

During the third quarter, ANGO completed its operational excellence program which was announced last quarter. The program is designed to save $15 to $18 million over the course of the next three years through greater efficiencies and improved business performance.

Zacks Rank

Currently, ANGO carries a Zacks Rank #3 (Hold). Better-ranked stocks worth a look in the medical instruments industry are Cynosure, Inc. CYNO, Syneron Medical Ltd. ELOS and Delcath Systems, Inc. DCTH. All of them sport a Zacks Rank #1 (Strong Buy).