AngioDynamics (ANGO) Beats on Q3 Earnings, Reiterates View
AngioDynamics Inc. ANGO reported third-quarter fiscal 2018 adjusted earnings of 25 cents per share, which beat the Zacks Consensus Estimate by 25% and improved 31.6% year over year.
Meanwhile, net sales fell almost 2% year over year to $83.9 million, missing the Zacks Consensus Estimate of $86 million.
AngioDynamics, Inc. Price and Consensus
AngioDynamics, Inc. Price and Consensus | AngioDynamics, Inc. Quote
Geographical Analysis
U.S. net sales in the third quarter of fiscal 2018 were $65.8 million, down 2.8% year over year due to decline in Venous unit, RFA product (radio frequency ablation) and PICCs businesses.
International net sales were $18.1 million, up 0.7% on a year-over-year basis. The upside can be attributed to consistent performance across each of the business units. However, net sales in the segment were partially offset by decline in sales in the company’s discontinued RFA product line in Japan.
Segmental Analysis
Peripheral Vascular (PV) business
Sales in this segment totaled $48.5 million in the reported quarter, down 1% from the year-ago quarter.
Growth in the Fluid and Thrombus Management product lines was offset by declines in the Venous Insufficiency and Angiographic Catheter businesses.
Vascular Access (VA) business
Sales in this segment were $23.3 million, down 2% on a year-over-year basis. The segment witnessed solid sales in BioFlo Midline related products. However, decent growth in the segment was more than offset by declines in PICCs product line.
Oncology/Surgery business
AngioDynamics witnessed sales of $12.1 million in the third quarter, down 7% year over year. Notably, lower sales related to the discontinued RFA product line hampered growth in the segment. However, mid-teens growth in sales of NanoKnife and the Solero Microwave Tissue Ablation System deserve a mention.
Margin Analysis
As a percentage of revenues, adjusted gross margin expanded 300 basis points (bps) to 54.2% in the third quarter of fiscal 2018, up from 51.2% in the year-ago quarter. The improvement in gross margin was primarily because of the ongoing operational improvements, recently completed facility consolidations and the expiration of a royalty arrangement in the last quarter of this fiscal year.
Adjusted EBITDAS in the third quarter of fiscal 2018 was $16.8 million compared with $14.9 million in the third quarter of fiscal 2017.
Financial Condition
AngioDynamics had a strong cash flow balance in the third quarter. Per management, the company generated $4.3 million in operating cash flow and $3.9 million in free cash flow.
Additionally, AngioDynamics ended the quarter with $53.6 million in cash and cash equivalents and $93.8 million in debt, excluding the impact of deferred financing costs.
Guidance Reiterated
AngioDynamics reaffirmed its guidance for fiscal 2018.
For fiscal 2018, the company expects net sales in the range of $345-$350 million. The Zacks Consensus Estimate for fiscal 2018 sales is pegged at $352.3 million.
The company expects adjusted earnings per share in the range of 64-68 cents, excluding any impact from the recently legislated 2017 Tax Reform Act. The Zacks Consensus Estimate for fiscal 2018 adjusted earnings stand at 72 cents. Including the impact of Tax Reform, guidance for adjusted earnings per share is expected in the band of 70-74 cents.
Free cash flow is expected in the range of $30-$35 million.
Our Take
AngioDynamics witnessed gross margin expansion and strong profits in the third quarter of fiscal 2018. The company is encouraged by the market’s solid response to Solero within the Microwave Ablation space. Notably, AngioDynamics is a leading player in the thrombolytic catheters space. The company boasts of highly unique catheters like Uni-Fuse, SpeedLyser and Pulse Spray under the thrombus portfolio. AngioDynamics’ consistent focus on financial discipline and building a high-quality capital structure will boost investments toward innovative product portfolio and enable strategic acquisitions.
On the flip side, decline in sales in the company’s discontinued RFA product line in Japan is a concern. The company also has a high outstanding debt level. Declines in Venus Insufficiency, Core Businesses, PICCs and across the majority of the company’s Vascular Access non-BioFlo products are headwinds.
Zacks Rank & Key Pics
AngioDynamics carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the broader medical sector are Bio-Rad Laboratories BIO, athenahealth, Inc. ATHN and Edwards Lifesciences Corporation EW.
Bio-Rad Laboratories sports a Zacks Rank of #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here. The company has a long-term expected earnings growth rate of 20%.
athenahealth is a Zacks #1 Ranked player. The company has a long-term expected earnings growth rate of 21.5%.
Edwards Lifesciences has a long-term expected earnings growth rate of 15.1%. The stock has a Zacks Rank of #2 (Buy).
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