Here's Why You Should Retain Penumbra (PEN) Stock for Now
Penumbra, Inc. PEN is well poised for growth in the coming quarters driven by the company’s vascular and neuro businesses. Penumbra’s Immersive Healthcare business, too, is making significant progress. Its robust estimate for 2023 revenues reflects continued demand for its products. Yet, currency movements and a challenging competitive landscape affect the top line.
In the past year, the Zacks Rank #3 (Hold) stock has gained 11.2% compared with the industry’s 13.3% fall and the S&P 500’s 6.5% rise.
The global healthcare provider company has a market capitalization of $8.72 billion. It surpassed estimates in the trailing four quarters, the average surprise being 56.7%.
Key Growth Catalysts
Robust Vascular Business Growth: Penumbra is demonstrating strong growth within the company’s Vascular business, banking on the rapid increase in sales of the company’s vascular thrombectomy products in the United States. In this region, the company is benefiting from sales of new products and further market penetration of existing products. Despite supply-related issues, the Lightning Flash launch earlier in 2023 exceeded Penumbra’s expectations, becoming the biggest product launch in its history. Lightning Flash and Lightning Bolt are also accelerating in Penumbra’s U.S. vascular thrombectomy franchise, which increased 42% year over year in the third quarter. The company expects to see a robust growth trajectory in the Vascular arm in the next five years and beyond.
Improving Neuro Trend: Within the Neuro franchise, Penumbra is witnessing growth in the stroke business. It is experiencing strong customer uptake of RED 72 (with the proprietary SENDit technology), RED 43 and BMX81. According to Penumbra, coupled with the recently launched BMX81, these products will continue to increase the company’s growth and market share in Neuro, particularly as physicians continue to realize the trade-off with oversized aspiration catheters in the market in the past several years.
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In the third quarter, a strong increase in the company’s Neuro product sales was driven by an increase in sales of neuro thrombectomy products and neuro access products.
Upbeat 2023 Guidance: For the fourth quarter of 2023, the company projects total company revenue growth to accelerate to 28%-31% year over year. This correlates to the midpoint of the 2023 annual guidance of $1.05-$1.07 billion, suggesting a 24%-26% improvement from 2022 levels. The Zacks Consensus Estimate for fourth-quarter and full-year 2023 revenues is pegged at $290.2 million and $1.06 billion, respectively.
Downsides
Foreign Exchange Impacts Sales: A significant portion of Penumbra’s sales and costs are exposed to changes in foreign exchange rates. In 2022, approximately 30.2% of the company's consolidated revenues came from the non-U.S. markets. Its operations use multiple foreign currencies, including the euro and Japanese yen. Changes in those currencies relative to the U.S. dollar will impact sales, cost of sales and expenses, and consequently, net income.
Tough Competitive Landscape: The medical device industry is intensely competitive, subject to rapid change and significantly affected by new product introductions and other market activities of industry participants. Penumbra competes with a number of manufacturers and distributors of neuro and vascular medical devices. The company’s most notable competitors are Boston Scientific, Inari, Medtronic, Stryker, Terumo, AngioDynamics and several private companies.
Estimate Trends
In the past 90 days, the Zacks Consensus Estimate for its fiscal 2023 earnings has moved up 13.7% to $1.99.
The Zacks Consensus Estimate for fiscal 2023 revenues is pegged at $1.06 billion, indicating a 25.2% rise from the year-ago reported number.
Key Picks
Some better-ranked stocks in the broader medical space that have announced quarterly results are Abbott Laboratories ABT, DexCom, Inc. DXCM and Integer Holdings Corporation ITGR.
Abbott, carrying a Zacks Rank of 2 (Buy), reported adjusted earnings per share (EPS) of $1.14 in third-quarter 2023, beating the Zacks Consensus Estimate by 3.6%. Revenues of $10.14 billion outpaced the consensus mark by 3.6%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Abbott has a long-term estimated growth rate of 5.1%. ABT’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 6.8%.
DexCom reported third-quarter 2023 adjusted EPS of 50 cents, beating the Zacks Consensus Estimate by 47.1%. Revenues of $975 million surpassed the Zacks Consensus Estimate by 4%. It currently carries a Zacks Rank #2.
DexCom has a long-term estimated growth rate of 33.6%. DXCM’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 36.4%.
Integer Holdings reported adjusted EPS of $1.27 in third-quarter 2023, beating the Zacks Consensus Estimate by 20.9%. Revenues of $404.7 million surpassed the Zacks Consensus Estimate by 8.7%. It currently carries a Zacks Rank #2.
Integer Holdings has a long-term estimated growth rate of 15.8%. ITGR’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 11.9%.
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Abbott Laboratories (ABT) : Free Stock Analysis Report
DexCom, Inc. (DXCM) : Free Stock Analysis Report
Penumbra, Inc. (PEN) : Free Stock Analysis Report
Integer Holdings Corporation (ITGR) : Free Stock Analysis Report
