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Bear of the Day: Endologix (ELGX)

Neena Mishra

About the Company
Headquartered in Irvine, California, Endologix (ELGX) develops, manufactures, markets and sells minimally invasive treatments for vascular diseases. Its main product is an endoluminal stent graft system used for the treatment of abdominal aortic aneurysms (:AAA).
Disappointing Fourth Quarter Results and 2014 Guidance

The company reported its Q4 results on February 27. Global revenue for the quarter was up 21% from the prior year quarter but sales were up only 8% in the US. According to the management, softness was mainly due to a pullback from some of the centers that didn’t get selected for the Nellix IDE trial, the delay in the Ventana program and increased competitive activity.

GAAP net loss was $3.4 million or $0.05 per share in the quarter compared to a net loss $6.5 million or $0.11 per share for the fourth quarter of 2012.

The company expects Q1 2014 sales to be sequentially down from Q4 2013, due to weak start to the year. They also revised down their guidance for FY 2014 sales growth to an 11% to 15% range.

Downward Revisions
After disappointing guidance, estimates for the company have moved downwards. Zacks Consensus Estimates for the current year and next year are now down to ($0.24) per share and ($0.04) per share respectively, from ($0.01) per share and $0.27 per share, 30 days back.
Declining estimates sent ELGX to a Zacks Rank #5 (Strong Sell).
Better Play?
Investors interested in the Medical sector, could consider some better-ranked stocks including Align Technology Inc. (ALGN), CR Bard Inc. (BCR) or Becton, Dickinson and Company (BDX). All these stocks hold a Zacks Rank #2 (Buy) 

Bottom Line

While the company has a significant long-term potential both in the US and globally, with its unique products portfolio, near-term uncertainty in the US will keep the stock under pressure for the time being.

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