Abiomed Sees Flat Q4 Earnings - Analyst Blog

Abiomed Inc. ABMD posted earnings per share of 9 cents for the fourth quarter of its fiscal 2014, which was flat compared with the year-ago earnings as well as the Zacks Consensus Estimate. However, net earnings fell 3.2% to $3.6 million from $3.7 million in the fiscal 2013-fourth quarter.

For the full fiscal year, earnings per share halved to 18 cents from 37 cents in the prior year quarter. Net earnings also halved to $7.4 million from $15.0 million in fiscal 2013.

The decline in earnings for both the quarter and the year is attributable to higher costs and expenses that more than offset the impact of increased revenues for both the periods. Due to the dull earnings, shares of Abiomed slid 9.4% since the announcement of financial results for the quarter.

Revenues

Revenues in the quarter rose 15.5% to $50.4 million, marginally lagging the Zacks Consensus Estimate of $51 million. Revenues for the year upped 16.1% to $183.6 million.

Globally, Impella revenues grew 17% to $46.1 million in the quarter. For the full fiscal year, worldwide Impella revenues escalated 19% to $167.0 million.
 
In the U.S., Impella revenues increased 15% to $41.8 million in the quarter. For the full fiscal year, U.S. Impella revenues zoomed 16% to $152.0 million.
 
Abiomed revealed that an additional 23 hospitals purchased Impella 2.5 during the quarter, compared to 30 hospitals in the fourth quarter of the prior fiscal year, bringing the total number of customer sites to 859.

As part of Abiomed's continued Impella CP launch, an additional 77 hospitals purchased Impella CP during the quarter, compared to 60 hospitals in the prior year, bringing the total number of Impella CP U.S. sites to 389.

Expenses and Margins
 
Costs and expenses in the quarter rose 18.2% to $46.8 million in the quarter. For the full fiscal year, costs and expenses grew 23.8% to $175.3 million.

Gross margin in the quarter inched up 10 basis points (bps) to 79.9% from 79.8% in the fourth quarter of fiscal 2013. For the full fiscal 2014, gross margin fell 30 bps to 79.7% compared to 80.0% in the prior year.
 
Operating margin in the quarter dropped 220 bps to 7.3% from 9.5% in the fourth quarter of fiscal 2013. For the full fiscal year, operating margin slashed 590 bps to 4.6% from 10.5% in the year-ago quarter.

Financial Position

Abiomed had cash and cash equivalents of $20.9 million as of Mar 31, 2014, significantly up from $9.5 million as of Mar 31, 2013. The company had no debt at the quarter-end.

Guidance

For fiscal 2015, Abiomed forecasted revenues between $205 and $212 million for the year. The Zacks Consensus Estimate of $209 million lies within the guided range. Operating margin is expected in the range of 5% to 7% for the year.

Our Take

Although we are impressed with the robust Impella utilization, higher expenses are a cause of concern. Abiomed currently has a Zacks Rank #4 (Sell).

Some better-ranked medical instruments stocks include Accuray Incorporated ARAY, Masimo Corporation MASI, and Natus Medical Inc. BABY. All of these carry a Zacks Rank #2 (Buy).