(By Rich Bieglmieir) ABIOMED, Inc.
) is expected to report earnings before the market opens on Thursday, August 2, 2012. Management will host the conference immediately afterwards.
Wall Street anticipates that ABMD will earn $0.03 for its 1st quarter. iStock expects the medical device maker for hearts to report earnings that will exceed Wall Street's consensus number. The iEstimate is 5 cents – a 2 cent upside surprise.
Our iEstimate could prove to be conservative if recent trends continue into the first quarter. ABIOMED's flagship product line, Impella, grew 34%, accounting for 84.6% of revenues in the past year, up from 77.4% in the prior year.
Impella's surge helped the healthcare company's topline grow by 25.5% in fiscal 2012. While revs sprung by 25%, the cost of moving product out the door grew at a much slower pace. The cost of product increased by only 11.5% and fell to 19.4% of revenue, versus 21.7% in the preceding 12 months. Selling, general & administrative expense (SG&A) rose 15.1 and dropped from 61% in fiscal 2011 to 56.7% in the just completed year.
With sales outpacing costs, margins should continue to get fatter, and that's why iStock believes our iEstimate could prove to be light.
ABIOMED has topped the Street's view in eight of the last 10 quarters by an average of 130%. In the other two cases, profits were on target once and missed by 120% on the other occasion. When ABMD exceeded forecasts, seven of the eight bullish surprises have rewarded investors with an average gain of 18.61%, with five rallies in excess of 12.5%.
The upcoming announcement is not without risk. iStock is concerned that ABMD's accounts receivables widened by 33% and inventories bloated by 48%. Sooner or later management will have to get these two numbers in line with sales growth, or write-offs and shrinking margins will negatively impact profits.
Meanwhile, the robust dollar that has wrecked many announcements, it is a small to no concern for us as only 8% of revenues are from international sales.
We don't expect either yellow-flag to flare up for Thursday's announcement, but should be watched for improvement or deterioration. iStock will, however, be interested in hearing management's guidance on how the 2.3% Obamacare medical device tax will impact profits now that the Supreme Court has ruled on the Affordable Healthcare Act.
Since the ruling, ABMD's share price has dropped from $24 and change to a little less than $22 today. iStock sees a fair amount of support on the stock chart between $21 and $20.50. The next floor is $19ish, and anything below $17 could be disastrous.
If our iEstimate is on the mark, and management provides robust, forward guidance, we can see the price returning to the mid $24s. If the stock price gets on top of $24.50, then it would break a multiple that's spanned all of 2012. Bust out to new highs and the price could be adios, bye-bye and charge much higher as nearly 24% of the float (shares available for trading) is sold short.