Intersect ENT (XENT) Down 49.5% Since Last Earnings Report: Can It Rebound?

A month has gone by since the last earnings report for Intersect ENT (XENT). Shares have lost about 49.5% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Intersect ENT due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Intersect ENT Reports Narrower-Than-Expected Q4 Loss

Intersect ENT reported fourth-quarter 2019 loss per share of 25 cents, narrower than the Zacks Consensus Estimate of a loss of 35 cents. However, the reported loss is significantly wider than the year-ago loss of 16 cents.

Full-year loss per share was $1.37, significantly wider than the year-ago loss of 76 cents. However, the metric was narrower than the Zacks Consensus Estimate of loss per share of $1.48.

Revenues in Detail

Reported revenues in the fourth quarter declined 3.1% year over year to $31.8 million but beat the Zacks Consensus Estimate by 2.9%. The year-over-year downside resulted from lower unit sales of the PROPEL product portfolio. However, SINUVA contributed 4% to fourth-quarter 2019 revenues.

For the year, revenues were $109.1 million, reflecting a 0.6% increase from the year-ago period. Revenues beat the Zacks Consensus Estimate by 0.4%. The year-over-year upside resulted from growth in the adoption of SINUVA, which contributed 4% to 2019 revenues.

Margins

Cost of sales was $7.2 million in the reported quarter, up 13.1% year over year. Gross profit declined 7.1% to $24.5 million. Gross margin was 77.3%, reflecting a contraction of 326 basis points year over year.

Selling, general and administrative expenses were up 3.5% to $27.2 million in the quarter under review. Research and development expenses were $5.8 million, up 1.5% year over year. Adjusted operating expenses were $33.1 million in the fourth quarter, up 3.1% year over year.

The company reported adjusted operating loss of $8.5 million, wider than the year-ago adjusted operating loss of $5.7 million.

Cash Position

Intersect ENT exited the year with cash, cash equivalents and short-term investments of $90.6 million compared with $100.8 million at the end of 2018.

2020 Guidance

Intersect ENT issued revenue guidance with its preliminary results on Jan 13, 2020. The company reiterated its revenue expectations for the year at $115-$119 million. The Zacks Consensus Estimate for the metric is pegged at $117.6 million.

The company expects quarterly revenue growth to improve throughout the year, with first-quarter 2020 revenues likely to be flat compared with the first quarter of 2019.

Gross margin is estimated to be 70-75%. However, quarterly margins are expected to decline in the first half of the year before improving.

Operating expenses are expected to be between $141 million and $145 million.

How Have Estimates Been Moving Since Then?

Estimates revision followed a downward path over the past two months. The consensus estimate has shifted -16.45% due to these changes.

VGM Scores

At this time, Intersect ENT has a poor Growth Score of F, a grade with the same score on the momentum front. Following the exact same course, the stock was allocated a grade of F on the value side, putting it in the bottom 20% quintile 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

Intersect ENT has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.