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Why Is Penumbra (PEN) Down 4.8% Since Last Earnings Report?

It has been about a month since the last earnings report for Penumbra (PEN). Shares have lost about 4.8% in that time frame, underperforming the S&P 500.

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

Penumbra Q1 Earnings Miss, Margins Improve

Penumbra reported first-quarter 2024 adjusted earnings per share of 41 cents, which missed the Zacks Consensus Estimate by a penny. However, adjusted earnings per share improved 78.3% year over year.

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GAAP earnings per share was 28 cents per share, reflecting 27.3% growth from the prior-year quarter.

Revenues in Detail

Penumbra registered revenues of $278.7 million in the reported quarter, up 15.4% year over year on a reported basis and 15.2% at a constant exchange rate or CER. The figure topped the Zacks Consensus Estimate by 1.4%.

Quarter in Details

The company reports under two geographical segments — United States and International.

PEN recorded revenues of $209.6 million (75.2% of total revenues) in the United States, up 22% on a reported basis as well as at CER year over year.

Sales declined 0.7% to $69 million in the International segment. Excluding foreign currency impact, the unit’s sales were down 1.7% year over year.

On the fourth-quarter 2023 earnings call, Penumbra announced changes to its product revenue categories to provide investors with more meaningful information to understand the performance of its business and strategic direction. Per the changes, the company currently reports its product revenues in the following categories — Thrombectomy and Embolization and Access.

The company registered revenues of $187.7 million from sales of Thrombectomy products, up 29.5% on a reported basis and 29.3% at CER from the prior-year level.

Sales of Embolization and Access products totaled $90.9 million, down 5.7% on a reported basis and down 6% at CER.

Margin Trend

In the reported quarter, Penumbra’s gross profit improved 19.9% to $181.1 million. Gross margin expanded 242 basis points to 65% despite a 7.9% rise in the cost of revenues.

Selling, general and administrative expenses rose 17.3% to $144.4 million. Research and development expenses totaled $24.6 million, up 23.2% year over year. Total operating expenses were $169 million, up 18.2% year over year.

Adjusted operating margin of 4.3% marked a 103-basis point expansion from the prior-year quarter’s figure.

Financial Update

Penumbra exited the first quarter of 2024 with cash and cash equivalents and marketable investments of $223.1 million compared with $167.5 million at 2023-end.

2024 Guidance Reaffirmed

The company reiterated total revenue guidance for 2024 in the range of $1.23-$1.27 billion, suggesting year-over-year growth of 16-20% from the 2023 level. The Zacks Consensus Estimate is currently pegged at $1.24 billion.

It also reaffirmed the U.S. thrombectomy franchise to increase 27-30% year over year, primarily driven by its Computer-Assisted Vacuum Thrombectomy (CAVT) products.

Gross margin and adjusted operating margin guidance were reiterated in the range of 100 to 150 basis points expansion and 100 to 200 basis points expansion, respectively, for the full year.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates revision.

The consensus estimate has shifted -5.27% due to these changes.

VGM Scores

At this time, Penumbra has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. Following the exact same course, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. 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 these revisions indicates a downward shift. Notably, Penumbra has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

Performance of an Industry Player

Penumbra is part of the Zacks Medical - Instruments industry. Over the past month, Idexx Laboratories (IDXX), a stock from the same industry, has gained 1.8%. The company reported its results for the quarter ended March 2024 more than a month ago.

Idexx reported revenues of $964.1 million in the last reported quarter, representing a year-over-year change of +7.1%. EPS of $2.81 for the same period compares with $2.55 a year ago.

For the current quarter, Idexx is expected to post earnings of $2.87 per share, indicating a change of +7.5% from the year-ago quarter. The Zacks Consensus Estimate has changed -0.8% over the last 30 days.

The overall direction and magnitude of estimate revisions translate into a Zacks Rank #4 (Sell) for Idexx. Also, the stock has a VGM Score of B.

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