Balanced View on Thoratec Corp. - Analyst Blog

On May 21, we have updated our research report on Thoratec Corp. THOR. The company continues to do well in overseas markets, especially in its HeartMate line-up. However, THOR's unified product line and small size make it risky.

Despite being flat year-over-year, THOR's 2014-first quarter earnings and revenues surpassed the Zacks Consensus Estimates on both earnings and revenue fronts.

The company posted flat adjusted earnings of 33 cents per share for the 2014-first quarter compared with the year-ago level but beat the Zacks Consensus Estimate by 6 cents. Adjusted earnings edged down 1.8% to $19.2 million from $19.5 million in the comparable quarter a year ago.

THOR's revenues in the quarter rose 6.8% to $125.7 million, exceeding the Zacks Consensus Estimate of $124.0 million. Revenues from the U.S. upped 3.6% to $95.6 million while the same from international business grew 18.5% to $30.1 million.

Revenues from the flagship HeartMate product line came in at $110.0 million, reflecting a 6.9% year-over-year increase due to the expansion of its international business. Revenues from CentriMag were $13.0 million, up 25.0% from the year-ago level. However, revenues from PVAD and IVAD fell 39.5% to $2.3 million in the quarter.

For fiscal 2014, THOR expects revenues in the range of $520–$535 million. The current Zacks Consensus Estimate of $527 million lies within the guided range. Adjusted gross margin is expected to be 70.7% for the year.

THOR also expects adjusted earnings per share (excluding stock based compensation) of $1.39–$1.49 for the year. The current Zacks Consensus Estimate of $1.31 lies below the guided range.

Heart failure is a terminal degenerative condition having more than 20 million victims globally and THOR enjoys a monopoly in the market with its HeartMate device.

However, the small size of the company may restrict its ability to raise resources. The absence of strategic alliances may hinder its ability to develop new products.

Currently, THOR retains a Zacks Rank #3 (Hold). Some better-ranked medical instrument companies that are worth considering at the moment include Alphatec Holdings, Inc. ATEC, RTI Surgical Inc. RTIX, and Edwards Lifesciences Corp. EW. Both Alphatec Holdings and RTI Surgical carry a Zacks Rank #1 (Strong Buy), while Edwards Lifesciences retains a Zacks Rank #2 (Buy).

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