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Cardiovascular Systems (CSII) Up 6.4% Since Last Earnings Report: Can It Continue?

Zacks Equity Research
In the latest trading session, ServiceNow (NOW) closed at $294.55, marking a -0.68% move from the previous day.

A month has gone by since the last earnings report for Cardiovascular Systems (CSII). Shares have added about 6.4% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Cardiovascular Systems due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Cardiovascular Systems Q3 Earnings Top on Robust Coronary Sales

Cardiovascular Systems delivered earnings per share of 2 cents in third-quarter fiscal 2019 compared with the year-ago earnings of a penny.

The reported figure beat the Zacks Consensus Estimate of a loss of 4 cents.

Net Sales

Cardiovascular Systems’ revenues of $63.3 million in the fiscal third quarter marks a 13.9% year-over-year increase. Meanwhile, the top line matched the Zacks Consensus Estimate.

Segment Details

Coronary device revenues jumped above 24% year over year to $18.2 million. Domestic coronary revenues grew 18%, primarily driven by expanded unit volumes. Meanwhile, peripheral device revenues rose 10% to $45.2 million on a year-over-year basis. Worldwide peripheral unit volume was up 16% while domestically, the metric improved 14%.

Margin

Gross margin in the reported quarter was 80.8%, down 128 basis points (bps) year over year.

Meanwhile, selling, general and administrative (SG&A) expenses rose 9.4% to $41.4 million plus research and development (R&D) expenses escalated 26.6% to $9.3 million. As a result, adjusted operating expenses increased 12.2% to $50.6 million. Operating margin in the reported quarter contracted 8 bps to 0.80%.

Financial Position

The company exited third-quarter fiscal 2019 with cash and cash equivalents of $115.3 million compared with $118.8 million at the end of the fiscal second quarter.

Outlook

Cardiovascular Systems updated its fiscal 2019 guidance. The company has narrowed its revenue expectation to $245-$247 million (the earlier band was $243-$247 million) for fiscal 2019. The current Zacks Consensus Estimate for full-fiscal revenues is pegged at $245.7 million, within but near the lower end of the company's view.

Moreover, the company currently anticipates gross profit to account for 80-81% (past forecast was80%) of revenues in fiscal 2019.

The company might incur net loss of 0.5% to breakeven earnings (previous prediction was net loss of 1-2%) during fiscal 2019. The current Zacks Consensus Estimate is pegged at a loss of 10 cents.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates. The consensus estimate has shifted 86.67% due to these changes.

VGM Scores

At this time, Cardiovascular Systems has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. However, the stock was allocated a grade of F on the value side, putting it in the fifth quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of this revision looks promising. It comes with little surprise Cardiovascular Systems has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.



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