On Mar 18, Zacks Investment Research downgraded Heartware International Inc. (HTWR) to a Zacks Rank #4 (Sell) from a Zacks Rank #3 (Hold).
Why the Downgrade?
For fiscal 2014, seven estimates moved down in the past 30 days, with just one upward revision in the same time frame, causing the Zacks Consensus Estimate to drop by 22.5% to a loss of $2.72 per share. The company reported negative earnings surprises in 2 of the last 4 quarters with the last reported quarter clocking a negative surprise of 15.0%.
Further, the long-term expected earnings growth for this stock stands at 15.0%, lower than the industry growth of 17.3%.
Heartware continues to make losses due to higher costs and expenses. For the fourth quarter of 2013, the company reported a loss of $15.3 million or 92 cents per share, which is broader than the Zacks Consensus Estimate of 80 cents. Following the earnings release on Feb 27, 2014, shares of Heartware dropped 5.6% till the last closing date.
Heartware’s cost and operating expenses continue to rise, which may be attributable to inefficient cost management. For full year 2013, cost of revenues surged 49.9% to $76.5 million whereas the total operating expenses increased by 30.2% to $179.0 million in the year.
As of Dec 31, 2013, inventories stood at $40.9 million, up from $38.4 million as of Dec 31, 2012 and $32.0 million as of Dec 31, 2011. Current liabilities increased 56.2% to $53.2 million as of Dec 31, 2013 from $34.0 million as of Dec 31, 2012.
Other Stocks to Consider
Some better-ranked stocks that warrant a look in the medical instruments industry are Cynosure, Inc. (CYNO), Syneron Medical Ltd. (ELOS) and ABIOMED, Inc. (ABMD). While both Cynosure and Syneron Medical carry a Zacks Rank #1 (Strong Buy), ABIOMED holds a Zacks Rank #2 (Buy).