Penumbra, Inc. PEN is likely to grow in the coming quarters, backed by the strength exhibited in the Thrombectomy business. The company’s robust portfolio expansion looks promising. However, the impact of forex woes is a headwind. Competitive disadvantages also add to the worry.
In the past year, this Zacks Rank #3 (Hold) company has lost 16.2% against the industry’s 17.8% growth and the S&P 500’s 30.4% rise.
The global healthcare provider company has a market capitalization of $8.67 billion. PEN beat on earnings in three of the trailing four quarters and missed in one, the average surprise being 16.15%.
Let’s delve deeper.
PEN’s Key Upsides
Robust Thrombectomy Business Growth: Penumbra is demonstrating strong growth within its Thrombectomy business on the back of a rapid increase in sales of the company’s vascular thrombectomy products in the United States as well as its assisted vacuum thrombectomy (CAVT) line of products. In the second quarter of 2024, the company delivered 25% year-over-year growth in thrombectomy in the United States, driven by volume growth in newer accounts since 2023.
PEN’s international thrombectomy also exceeded the company’s expectations in the second quarter, up 26.2% year over year. This reflects continuous strong momentum in CAVT products. The company is currently working with the regulatory and reimbursement bodies in Europe, Asia-Pacific and Latin America to bring the entire CAVT portfolio to patients internationally. Successful execution of this strategy should allow Penumbra to focus on sustaining long-term revenue growth while increasing profitability.
Strong Portfolio Expansion: Penumbra’s consistent revenue growth momentum is being driven by the extraordinary outcomes that the company is witnessing in patients treated with Lightning Flash, Lightning Bolt 7 and RED 72 with SENDit technology. During the second quarter of 2024, within the neuro access business, Penumbra launched its midway access catheters. Penumbra made the full launch of its Lightning Flash 2.0 on the heels of outstanding outcomes from the evaluation cases done in early April. The product further optimizes the advantages of computer CAVT and Venous thromboembolism.
The company expects to gain more market share through 2024 ahead of a Thunderbolt launch. Meanwhile, PEN expects the launch of Flash 2.0 and Lightning Bolt 7 in Europe late this year to have a pronounced impact on its international growth in 2025. Combined with Flash and Bolt 7, Penumbra expects its CAVT portfolio to drive market share and market growth in Deep vein thrombosis, Pulmonary embolism and arterial.
PEN’s Key Downsides
Foreign Exchange Impacts Sales: A significant portion of Penumbra’s sales and costs is exposed to changes in foreign exchange rates. The company’s operations use multiple foreign currencies, including the euro and Japanese yen. Changes in those currencies relative to the U.S. dollar should impact its sales, cost of sales and expenses, and consequently, net income. In the second quarter of 2024, adverse foreign currency translation had a 0.7% impact on Penumbra’s international sales.
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Tough Competitive Landscape: The medical device industry is intensely competitive, subject to rapid changes, new product introductions and other market activities of industry participants. The company’s most notable competitors are Boston Scientific, Medtronic, Stryker and several private companies. Most of these competitors are large, well-capitalized companies with longer operating histories and greater resources than Penumbra. As a consequence, they are able to spend more on product development, marketing, sales and other product initiatives than PEN. The company also competes with several smaller medical device companies with single products or a limited range of products.
PEN's Estimate Trends
In the past 30 days, the Zacks Consensus Estimate for 2024 earnings has moved south 1.5% to $2.59 per share.
The Zacks Consensus Estimate for revenues is pegged at $1.19 billion, indicating a 12.4% rise from the year-ago reported number.
Key Picks
Some better-ranked stocks in the broader medical space are TransMedix Group TMDX, AxoGen AXGN and Phibro Animal Health PAHC.
TransMedix Group’s earnings are expected to surge 258.4% in 2024. Its earnings surpassed the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 287.5%. Shares of the company have risen 187.4% in the past year compared with the industry’s 18.8% growth. TMDX sports a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
AxoGen, carrying a Zacks Rank #2 (Buy) at present, has an earning yield of 94.1% compared with the industry’s 12.3%. Shares of the company have risen 210.3% compared with the industry’s 18.8% growth over the past year. AXGN’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 96.46%.
Phibro, carrying a Zacks Rank of 2 at present, has an estimated earnings growth rate of 21% for fiscal 2025 compared with the industry’s 12.6%. In the past year, shares of PAHC have risen 78.9% compared with the industry’s 22.9% growth. PAHC delivered a trailing four-quarter average earnings surprise of 4.10%.
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