Why Is Cardiovascular Systems (CSII) Down 10.8% Since Last Earnings Report?

A month has gone by since the last earnings report for Cardiovascular Systems (CSII). Shares have lost about 10.8% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Cardiovascular Systems 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.

Cardiovascular Systems Posts Wider-Than-Expected Loss in Q2

Cardiovascular Systems reported a loss per share of 10 cents in second-quarter fiscal 2020 against earnings per share of a penny in the prior-year period. The reported figure was also wider than the Zacks Consensus Estimate of a loss of 3 cents.

Net Sales

The company’s revenues of $68.3 million in the fiscal second quarter marked a 13.5% year-over-year increase. Meanwhile, the top line beat the Zacks Consensus Estimate by 0.6%.

Segment Details

In the quarter under review, global Coronary device revenues jumped 30% year over year to $20.8 million, driven by 14% unit growth in domestic atherectomy business, increased adoption of procedure support product portfolio and international expansion of orbital atherectomy, particularly in Japan. Domestic coronary revenues grew 22% to $18.5 million during the quarter.

Global Peripheral revenues increased 8% to $47.6 million, primarily led by 12%-unit growth in the domestic atherectomy business. Domestic peripheral revenues increased 9% to $47.5 million.

Total U.S. revenues rose 13% to $66 million, while International revenues totaled $2.4 million.

Margin

Gross margin in the reported quarter was 79.9%, down 101 basis points (bps) year over year on 19.5% rise in cost of goods sold.

Meanwhile, selling, general and administrative (SG&A) expenses rose 18.9% to $48.9 million, and research and development (R&D) expenses escalated 50.2% to $10.8 million. As a result, operating expenses increased 23.5% to $59.6 million. Operating loss in the reported quarter was $5 million against operating profit of $4.4 million a year ago.

Financial Position

The company exited second-quarter fiscal 2020 with cash and cash equivalents of $65.5 million compared with $58.9 million at the end of first-quarter fiscal 2020.

2020 Outlook

Cardiovascular Systems raised the lower end of its fiscal 2020 revenue guidance. The company projects revenues between $280 million and $283 million compared with $278-$283 million mentioned earlier. This indicates 13-14% growth from that reported in fiscal 2019. The Zacks Consensus Estimate for fiscal 2020 revenues is pegged at $280.8 million.

Moreover, the company reiterates gross profit margin at 79-80%.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended downward during the past month. The consensus estimate has shifted -92.31% due to these changes.

VGM Scores

At this time, Cardiovascular Systems 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 D. 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 this revision indicates a downward shift. Notably, Cardiovascular Systems has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.