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Thoratec Corporation Beats, Earnings Up

Zacks Equity Research

Thoratec Corporation (THOR) posted a 12.8% rise in adjusted earnings to 44 cents per share in the second quarter of the year from 39 cents a year ago while net earnings improved 9.2% to $25.7 million from $23.6 million in the 2012-quarter. With this, earnings surpassed the Zacks Consensus Estimate by 8 cents per share.

Reported earnings per share increased 14.3% to 40 cents from 35 cents in the 2012-quarter while reported net earnings rose 11.4% to $23.2 million from $20.8 million a year ago.

Revenues in the quarter rose 10.0% to $130.5 million, exceeding the Zacks Consensus Estimate of $121 million. Thanks to the company’s HeartMate product line that contributed $115.7 million to overall revenues, reflecting a 9% year-over-year increase due to the expansion of its international business, including the recent commercial launch in Japan.

Revenues from CentriMag product line soared 44% to $11.5 million but the same from PVADTM and IVADTM product line fell 29% to $2.7 million in the quarter.

Gross income rose 7.6% to $91.2 million from $84.7 million a year ago. Nevertheless, adjusted gross margin declined 150 basis points (bps) to 69.9% from 71.4% in the second quarter of 2012. The decrease was attributable to manufacturing variances, and the impact of the U.S. medical device excise tax, partially offset by lower intangible amortization expense and the absence of the Levitronix Medical fair market value inventory adjustment.

Adjusted operating income went up 6.0% to $35.6 million from $33.6 million a year ago. However, adjusted operating margin fell 100 bps to 27.3% from 28.3% in the second quarter of 2012.

Thoratec Corporation’s cash and investments were $270.9 million as of Jun 29, 2013, up 3.4% from $262.1 million as of Mar 30, 2013, and up 4.0% from $260.4 million as of Dec 29, 2012.

THOR reiterated its revenue guidance of $490 million–$510 million for 2013. Adjusted earnings per share for the year are expected in the range of $1.69 to $1.79 considering the previously disclosed $6-7 million of recurring operating expenses (approximately 7 cents per share on an after-tax basis) associated with the development of recently acquired DuraHeart II.

Thoratec Corporation develops, manufactures and markets proprietary medical devices used for circulatory support, vascular graft, blood coagulation and skin incision applications. The company currently markets the Thoratec Ventricular Assist Device System (called Thoratec VAD System or VAD System) and the HeartMate Left Ventricular Assist System (called HeartMate LVAS) in the U.S. and internationally for use as a bridge to heart transplant. THOR has also developed small diameter vascular grafts for use in hemodialysis access and coronary artery bypass surgery. Currently, it retains a Zacks Rank #2 (Buy).

Other stocks that are also performing well in the medical instruments industry include Mindray Medical International Limited (MR) with a Zacks Rank #1 (Strong Buy), and both Echo Therapeutics, Inc. (ECTE) and IDEXX Laboratories, Inc. (IDXX) with a Zacks Rank #2 (Buy).

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