Updated Research Report on ABIOMED - Analyst Blog

On May 15, we have updated our research report on ABIOMED, Inc. ABMD. We believe the company enjoys a strong demand for its flagship Impella products. However, increasing pressure on margins due to higher costs and expenses is a matter of concern for us.

ABIOMED 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.

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.
 
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. As a result, gross margin fell 30 bps to 79.7% in the year 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.

ABIOMED expects revenues to grow 11.4 to 15.2% year-over-year to $205–$212 million for fiscal 2015. 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, which is higher than the fiscal 2014 level.

Currently, ABIOMED retains a Zacks Rank #4 (Sell). Some better-ranked medical instrument companies that are worth considering at the moment include Accuray Incorporated ARAY, Masimo Corporation MASI, and Natus Medical Inc. BABY. All of them carry a Zacks Rank #2 (Buy).