Penumbra (PEN) Rides on Vascular Arm Strength Amid FX Woes
Penumbra PEN has been gaining from product innovations even amid lingering macroeconomic issues. The stock carries a Zacks Rank #3 (Hold) currently.
Penumbra is in the early stages of its journey to bring its proprietary thrombectomy technologies to patients in the United States and internationally. The company’s consistent revenue growth momentum is being driven by the extraordinary outcomes witnessed in patients treated with Lightning Flash, Lightning Bolt 7 and RED 72 with SENDit technology.
According to the company, Lightning Flash's transformative power, speed, safety and efficacy profile are the biggest drivers of the rapid early adoption of the product. Penumbra saw an acceleration in the adoption of Lightning Bolt 7 in the last few months of 2023 as conversion from surgery, lytics and other mechanical thrombectomy products gained momentum.
In terms of pipeline, on the third-quarter earnings call, the company stated that over the next 18 months, it plans to launch four new computer-assisted vacuum thrombectomy (CAVT) products in the United States.
Penumbra’s Vascular business is demonstrating strong growth, banking on a rapid increase in the sales of vascular thrombectomy products in the United States. In this region, the company is benefiting from the sales of new products and further market penetration of existing products. Despite supply-related issues, the Lightning Flash launch in 2023 exceeded Penumbra’s expectations, becoming the biggest product launch in the company's history.
Added to this, the company successfully launched the Lightning Bolt 7 arterial thrombectomy system in June following its FDA clearance in March 2023. Lightning Flash and Lightning Bolt aided Penumbra’s U.S. vascular thrombectomy franchise to achieve 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.
On the flip side, the lingering effects of the pandemic, like cost inflation, raw material supply constraints, as well as an increase in employee turnover rates in certain jurisdictions, continue to put significant pressure on Penumbra’s profitability.
For the third quarter of 2023, Penumbra reported an 18.9% rise in the cost of revenues. Selling, general and administrative expenses rose 15.9%. Total operating expenses were up 13.1% year over year.
Further, a significant portion of Penumbra’s sales and costs is 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. The company’s operations use multiple foreign currencies, including the euro and Japanese yen. Changes in those currencies relative to the U.S. dollar will impact its sales, cost of sales and expenses, and consequently, net income.
Over the past six months, shares of PEN have declined 14.9% compared with the industry’s 5.2% fall.
Key Picks
Some better-ranked stocks in the broader medical space are DaVita DVA, Haemonetics HAE and HealthEquity HQY. DaVita sports a Zacks Rank #1 (Strong Buy), while Haemonetics and HealthEquity carry a Zacks Rank #2 (Buy) each. You can see the complete list of today’s Zacks #1 Rank stocks here.
Estimates for DaVita’s 2023 earnings per share have remained constant at $8.07 in the past 30 days.
DVA’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 36.6%. In the last reported quarter, it delivered an average earnings surprise of 48.4%.
Estimates for Haemonetics’ earnings have remained constant at $3.89 for 2023 and at $4.15 for 2024 in the past 30 days.
HAE’s earnings beat estimates in each of the trailing four quarters, delivering an average surprise of 16.1%. In the last reported quarter, it posted an earnings surprise of 5.3%.
Estimates for HealthEquity’s 2023 earnings per share have increased from $2.03 to $2.15 in the past 30 days.
HQY’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 16.5%. In the last reported quarter, it delivered an average earnings surprise of 22.5%.
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