AngioDynamics HOLD

ANGO : NASDAQ : US$15.85

HOLD 
Target: US$16.25

COMPANY DESCRIPTION:
AngioDynamics develops, manufactures, and markets a
broad line of products for minimally invasive surgical
procedures to treat peripheral arterial disease.
AngioDynamics’ devices are used by interventional
radiologists and vascular surgeons to treat non-coronary
disease. Major product lines include angiographic
catheters, hemodialysis catheters, image-guided vascular
access products, as well as varicose vein ablation
products (laser and drug).

All amounts in US$ unless otherwise noted

Life Sciences — Biomedical Devices and Services
SOLID FQ3 SALES, BUT EARNINGS  LEVERAGE REMAINS ELUSIVE;
RAISING PT TO $16.25; HOLD
Investment recommendation
ANGO reported fiscal Q3 sales that came in better than our/consensus
expectations, but earnings leverage is taking a little longer to catch up to
the top-line performance. Total sales in FQ3 increased 8% Y/Y (vs. our
+6.5%E), and was highlighted by growth in each of the business units –
Peripheral Vascular (+11% Y/Y), Vascular Access (+3% Y/Y), and
Oncology (+15%). However, GM and pro-forma EPS missed our
estimates again, and while the company modestly increased F2014 sales
guidance, it lowered guidance for operating cash, FCF, and EPS.
We are encouraged by ANGO’s performance over the past couple of
quarters but remain cautious about recommending ANGO at these levels.
For us to get more constructive on the name, we want to see at least a
few more quarters of consistent improvement in the business and
evidence of sustained operating leverage. We raise our target to $16.25
but maintain our HOLD rating.
Investment highlights
 FQ3 revenue of $88.2M (+8%) modestly exceeded our/consensus
estimate of $86.9M.
 GM of 51.8% (+80 bps Y/Y) was below our expectation of 52.1%
owing to product mix.
 ANGO modestly raised its guidance range for F2014 revenue and
now expects $351-355M (+3-4%), but FCF guidance range reduced
to $20-$21M (from $25-$28M) based on ERP impact and inventory
build.

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