What's In Store For Penumbra (PEN) This Earnings Season?

Penumbra, Inc. (NYSE:PEN) is expected to report first-quarter 2018 results on May 8 after market close.

Last reported quarter, the company posted a positive earnings surprise of 1,100%. Moreover, Penumbra has outperformed the Zacks Consensus Estimate in three of the preceding four quarters, the average beat being 286.91%.

Let’s take a look at how things are shaping up prior to this announcement.

Catalysts

Continued Uptake of Penumbra System: Over the past few quarters, Penumbra showcased a strong top-line performance on consistent growth in neuro arm. It is to be noted that neuro growth was mainly driven by sales of the Penumbra system for ischemic stroke. The company witnessed increased sequential growth on higher procedural volumes. Moreover, the company is actively pursuing marketing strategies. In this regard, Penumbra’s Get Ahead of Stroke campaign was recognized as the most impactful awareness drive by the National Stroke Association in 2017.

Penumbra, Inc. Price and EPS Surprise

Penumbra, Inc. Price and EPS Surprise | Penumbra, Inc. Quote

Favorable Neuro Business Trend: Management seems impressed with the internal efforts to generate awareness in the domestic region. It also appears upbeat about an increased cooperation among hospitals to handle stroke cases. Also, larger hospital systems are investing in to increase the strength of new centers. However, management is little cautious about the growth trend, which might remain uneven in the coming quarters.

Strategies Buoy Optimism: The company is presently focusing on driving innovation, product development as well as geographic expansion. This is further expected to help Penumbra maintain a bullish stance in the to-be-reported quarter.

In this regard, Penumbra produced results from an independently-conducted COMPASS Trial and the company-sponsored PROMISE Study at the International Stroke Conference 2018 in January 2018. These studies were focused on Penumbra’s aspiration thrombectomy system for ischemic stroke revascularization.

Moreover, we are encouraged by the strong uptake of the company’s newly-launched 3D Revascularization Device, a technologically advanced stroke device developed for efficient aspiration with ACE Reperfusion Catheters.

Growing Peripheral Vascular Business: The Peripheral Vascular portfolio comprising Indigo System, embolization platform including RUBY Coil, POD (Penumbra Occlusion Device) and POD Packing Coil along with LANTERN microcatheter is quite strong. Moreover, the company has been witnessing a solid contribution from this segment over the past few quartersand the momentum is expected to continue this earnings season.

Strong Geographical Performance: Penumbra has been delivering a sturdy performance in both the domestic and international markets by reaping growth-boosting benefits from neuro business. We expect this drift to continue in the soon-to-be-reported quarter as well.

Rising Operating Expenses: In fourth-quarter 2017, the company witnessed a rise in operating expenses. We expect escalating costs and expenses to persistently weigh on the margins in the first quarter as well. Meanwhile, research and development expenses increased 37.7% in the fourth quarter. With the company remaining focused on product launches, we expect first-quarter results to post high expenses.

Further, foreign exchange fluctuations and a stiff competition from major commercial laboratories and hospitals continue to raise concerns.

Overall, the Zacks Consensus Estimate for first-quarter revenues of $87.8 million reflects a 20.3% rise from the prior-year quarter.

Here’s what the quantitative model predicts:

Per the proven Zacks model, a company with a favorable Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has higher chances of beating estimates if it also has a positive Earnings ESP.

Penumbra has a Zacks Rank #3, which increases the predictive power of ESP. However, the company’s Earnings ESP of -185.70% leaves our surprise prediction inconclusive as it requires a positive ESP to be confident about an earnings surprise.

We caution against the Sell-rated stocks (#4 or 5) going into an earnings announcement, especially when the company is seeing negative estimate revisions.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Stocks to Consider

Here are a few medical stocks worth considering as these have the right combination of elements to deliver an earnings beat this time around.

Array BioPharma Inc. (NASDAQ:ARRY) has an Earnings ESP of +25.83% and a Zacks Rank #2. You can seethe complete list of today’s Zacks #1 Rank stocks here.

Collegium Pharmaceutical, Inc. (NASDAQ:COLL) has an Earnings ESP of +7.05% and a Zacks Rank of 2.

MacroGenics, Inc. (NASDAQ:MGNX) has an Earnings ESP of +14.92% and is a Zacks #2 Ranked player.

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