Can ABIOMED (ABMD) Keep the Earnings Streak Alive? - Analyst Blog

We expect medical products developer ABIOMED, Inc. ABMD to beat expectations when it reports its fiscal 2014-fourth-quarter results on May 1, 2014.

Why a Likely Positive Surprise?

Our proven model shows that ABIOMED is likely to beat earnings because it has the right combination of two key ingredients.

Zacks ESP: Expected Surprise Prediction or Earnings ESP represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate. ABIOMED has a Zacks ESP of +175.00%. This is very meaningful and a leading indicator of a likely positive earnings surprise for shares.

Zacks Rank: ABIOMED carries a Zacks Rank #3 (Hold). Note that stocks with Zacks Ranks #1, 2 and 3 have a significantly higher chance of beating earnings. The Sell-rated stocks (#4 and 5) should never be considered going into an earnings announcement.  

The combination of ABIOMED's Zacks Rank #3 (Hold) and +175.00% ESP makes us confident of a possible positive earnings beat on May 1. It is worth noting in this context that ABIOMED has delivered positive surprises in 3 of its last 4 quarters, with an average beat of 73.41%.

What is Driving the Better-than-Expected Earnings?

In the fiscal 2014-third quarter, ABIOMED posted adjusted earnings of 11 cents per share, surpassing the Zacks Consensus Estimate by 7 cents and the company's year-ago quarter's adjusted earnings by 57.1%.

In the quarter, the company experienced a record 21% year-over-year growth in revenues to $46.2 million, accompanied by a 21% improvement in U.S. Impella revenues of $37.7 million. Growth in this quarter's revenues is consistent with the company's consistent track record of double-digit revenues growth for 17 consecutive quarters.

The primary driver behind ABIOMED's soaring revenues is Impella – a breakthrough patent platform, which provides minimally invasive procedures for percutaneous circulatory support to treat a growing population of high-risk patients. Impella is now in use in over 800 hospitals under 2000 trained physicians, and this is only likely to grow more with time.

Furthermore, the company's gross margin improved by 80 basis points to 79.5% in the last reported quarter, primarily due to higher production volumes and improved yields. Research and development expenses increased 23.8% to $7.8 million, induced by expenditures to support ongoing product development and clinical initiatives, including the Impella RP trial, and to support regulatory filings in the U.S. and Japan.

Based on its impressive performance in the past quarter, ABIOMED reiterated its fiscal 2014 revenue guidance in the range of $180–$185 million, with Impella growth expected to be approximately 20% for the year. The company also expects its operating margin to remain in the range of approximately breakeven to 5% in fiscal 2014.

Other Stocks to Consider

ABIOMED is not the only firm looking up this earnings season. We also see likely earnings beats coming from these 3 industry peers:

Myriad Genetics Inc. MYGN, earnings ESP of +10.87% and a Zacks Rank #1 (Strong Buy).

LDR Holding Corp. LDRH, earnings ESP of +26.32% and a Zacks Rank #2 (Buy).

Teleflex Inc. TFX, earnings ESP of +1.72% and a Zacks Rank #2 (Buy).