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Shockwave Medical (SWAV) Down 1% Since Last Earnings Report: Can It Rebound?

It has been about a month since the last earnings report for Shockwave Medical (SWAV). Shares have lost about 1% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Shockwave Medical due for a breakout? 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.

Shockwave Medical Q3 Earnings Beat, Revenues Rise Y/Y

Shockwave Medical reported third-quarter 2023 earnings per share (EPS) of 92 cents, which beat the Zacks Consensus Estimate of 81 cents by 13.6%. The company reported an EPS of 68 cents in the year-ago quarter.

Revenue Details

Revenues totaled $186 million, up a massive 42% from the prior-year period’s level. The top line also beat the Zacks Consensus Estimate by 0.6%. The growth was primarily driven by an increase in the purchase volume of products, both in the United States and abroad.

Revenues from coronary products grew nearly 50% during the third quarter, while peripheral product sales improved approximately 30%. Coronary franchise sales were driven by the strong adoption of new coronary device C2+ in international markets. The device was launched in the U.S. market during the third quarter.

While U.S. revenues were up 33% year over year, International revenues grew 88%. Internationally, SWAV’s sales were boosted by strong momentum in Germany, the United Kingdom, Italy, Spain and France.

Q3 Highlights

In August, the Centers for Medicare & Medicaid Services (CMS) created new Medicare Severity Diagnosis Related Group (MS-DRG) codes and payments for coronary Intravascular Lithotripsy (IVL) in the hospital inpatient setting.

Per the new codes, new coronary IVL-specific MS-DRGs are associated with higher payments than the MS-DRG payments for other Percutaneous Coronary Intervention procedures. Again, the CMS established a Category I Current Procedural Terminology add-on code for procedures involving coronary earlier this month. Under this new category, physicians will get a 20-30% increase in remuneration for the additional work associated with performing coronary IVL.

In September, SWAV appointed Nick West as the Associate Chief Medical Officer (CMO), who will likely succeed Dr. Dawkins as CMO in mid-2024.

Margins

Gross profit in the reported quarter was $161.5 million, up 42.3% year over year. As a percentage of revenues, the gross margin in the quarter was 87%, up 100 basis points year over year.

Sales and marketing expenses amounted to $56.9 million, up 35.2% from the prior-year quarter’s level. Research and development expenses totaled $39.5 million, up 95.9% on a year-over-year basis.

Operating income totaled $43.6 million compared with the year-ago quarter’s level of $36.8 million.

Financial Position

Shockwave Medical exited the third quarter with cash, cash equivalents and investments of $917.3 million compared with $258.6 million in the previous quarter.

Total assets amounted to $1.47 billion compared with $786.6 million at the end of the second quarter of 2023.

2023 Revenue Outlook

For 2023, Shockwave Medical continues to expect revenues in the band of $725-$730 million. The projected top line implies growth of 48-49% from the prior-year period’s level. The Zacks Consensus Estimate for the same is pegged at $729.8 million.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended downward during the past month.

The consensus estimate has shifted -14.85% due to these changes.

VGM Scores

Currently, Shockwave Medical has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

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

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Shockwave Medical has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

Performance of an Industry Player

Shockwave Medical is part of the Zacks Medical - Instruments industry. Over the past month, Pacific Biosciences of California (PACB), a stock from the same industry, has gained 22%. The company reported its results for the quarter ended September 2023 more than a month ago.

Pacific Biosciences reported revenues of $55.69 million in the last reported quarter, representing a year-over-year change of +72.4%. EPS of -$0.27 for the same period compares with -$0.32 a year ago.

Pacific Biosciences is expected to post a loss of $0.31 per share for the current quarter, representing a year-over-year change of +11.4%. Over the last 30 days, the Zacks Consensus Estimate has changed -1.7%.

The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Pacific Biosciences. Also, the stock has a VGM Score of F.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

ShockWave Medical, Inc. (SWAV) : Free Stock Analysis Report

Pacific Biosciences of California, Inc. (PACB) : Free Stock Analysis Report

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