Cardiovascular Systems (CSII) Global Sales Up, Margin Woe Stays
Cardiovascular Systems’ CSII firm position in the Coronary Arterial Disease as well as Peripheral Arterial Disease market buoys optimism. Yet, tough competition and persistent net loss continue to pose threats. The stock carries a Zacks Rank #3 (Hold).
Cardiovascular Systems’ shares have outperformed the industry over the past year. The stock lost 21.1% compared with the industry’s 38.3% decline. Fiscal first-quarter revenues exceeded the year-ago figure and topped the Zacks Consensus Estimate. U.S. peripheral revenues benefited from a 58% increase in ISD revenues, which totaled $2.1 million. First-quarter worldwide coronary revenues increased 8%. In the United States, coronary revenues increased 1%. Coronary support product revenues increased 70%, led by the continued adoption of the Sapphire 1-millimeter angioplasty balloons and the recent launch of the Scoreflex scoring balloon.
Although Coronary OAS (orbital atherectomy system) units decreased 12% year over year, there are signs of stabilization. Increasing physician use of treatment algorithms for vessel preparation is sorting the use of scoring balloons, IVL and orbital atherectomy into swim lanes. Further, while third-party data for the period showed depressed procedure volumes for the quarter, the company believes this was primarily due to the ongoing staffing shortages and seasonality. With these factors in mind, Cardiovascular Systems anticipates coronary OAS revenues to rebound in the fiscal second quarter as the treatment algorithms are adopted and hospital staffing continues to improve. Outside the United States, quarterly revenues increased 41% as a result of continued strength in Japan and Europe.
Cardiovascular Systems, Inc. Price
Cardiovascular Systems, Inc. price | Cardiovascular Systems, Inc. Quote
International revenues in the fiscal first quarter were mostly attributed to coronary, which grew 40% year over year with strong growth in each of the key markets, including Japan, Europe, Asia Pacific and Canada. In addition, the company launched OAS in five new countries during the first quarter. With this, the company is now commercial in 34 countries outside the United States, where it has over 1,000 physicians trained to use orbital atherectomy.
Within Peripheral, in October 2022, the company launched the 2.0 Max Crown for peripheral OAS. The company expects the 2.0 Max to accelerate future growth in peripheral OAS sales. In the second half, the company plans to launch its next-generation coronary device, which will be branded as the Diamondback Precision.
On the flip side, Cardiovascular Systems’ first-quarter fiscal 2022 loss per share was wider than the year-ago figure and the consensus mark. Lower procedure volumes due to hospital capacity issues and staffing shortages hurt peripheral sales growth. The gross margin in the quarter contracted on a year-over-year basis and the company incurred an operating loss on mounting costs and expenses. Other headwinds include inflation and ASP erosion.
On the profitability front, Cardiovascular Systems bears a long history of incurring net losses since its inception in 1989 and although it generated a net profit of $1.7 million in fiscal 2018, sustainability is a matter of question. In fiscal 2022, the company reported a net loss of $10.6 million. In fiscal 2021, 2020 and 2019, the company reported net losses of $13.4 million, $27.2 million and $0.3 million, respectively.
Macroeconomic issues and a tough competitive landscape are other headwinds.
Key Picks
Some better-ranked stocks in the broader medical space are AMN Healthcare Services, Inc. AMN, Progyny Inc. PGNY and Merit Medical Systems, Inc. MMSI.
AMN Healthcare, carrying a Zacks Rank #2 (Buy) at present, has an estimated long-term growth rate of 3.3%. AMN’s earnings surpassed the Zacks Consensus Estimate in all the trailing four quarters, the average beat being 10.9%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
AMN Healthcare has lost 4.2% compared with the industry’s 24.5% decline in the past year.
Progyny, carrying a Zacks Rank #2 at present, has an estimated long-term growth rate of 21.1%. PGNY’s earnings surpassed estimates in all the trailing four quarters, the average beat being 233.75%.
PGNY has lost 23% compared with the industry’s 24.5% decline in the past year.
Merit Medical, carrying a Zacks Rank #2 at present, has an estimated long-term growth rate of 11%. MMSI’s earnings surpassed estimates in all the trailing four quarters, the average beat being 25.4%.
Merit Medical has gained 21.7% against the industry’s 4.6% decline in the past year.
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