Ron- Some good questions. I think I should try to pin down my friend a bit on her statement that ATI could satisfy their needs for 75-100K less. I should caution that while I think my friend is probably a very good ultrasound technologist, she is not particularly experienced at making engineering evaluations. I'll see what I can do to "flesh out" that claim.
I received a Morgan-Stanley report by a Paul Brooke on ACN dated 25 July 1997. He has an Outperform rating on the stock (which was then at $23) with a price target of $34. I'll excerpt from the report:
FY Ends Dec..............EPS
96A ................... ($0.39)
97E $0.75
98E $1.00
KEY POINTS
- Acuson reported a strong 2Q97 with EPS of $0.19 vs. a loss of $0.39 last year and $0.03 better than consensus and our forecast, due both to better product growth and a lower tax rate. Product sales were better than expected (up 71% to $91.3 million, vs. our forecast of up 58% to $84.0 million). Service revenues were low but better than expected (up 2% to $21.4 million, vs. our forecast of down 5% to $20.1 million). The company is experience strong SG&A and R&D leverage and next year should see service and COGS leverage as well.
- The gross margin was lower than expected, reflecting currency, learning curve experience, and the product/service mix. Service is included for the first year following purchase, i.e., service revenues should begin to expand next year.
- We are increasing our EPS forecasst for 1997 to $0.75 from $0.72. We believe credibility continues to increase for our EPS target of $1.00 in 1998, $1.37 in 1999, and $1.84 is 2000.
- Our observations on the quarter include: (1) Sequoia was the No. 1 system in order dollars, Aspen was top in unit orders, and the XP represented above 25% of unit orders. All three legs of the story are working. (2) Market momentum is improving, expecially in the premium-priced products. Asia and Latin America were notably strong while Europe continues to lag growth experienced in the rest of the world. (3) We believe COGS will peak this year and begin a period of sustainable improvement during the 1998-2000 period.
- From a 1998 base, we project sales growth in the mid-teens and operating income groth in the 25-35% range over the subsequent 3-5 years. This implies operating margin improvement to the 12% area, i.e. there is still room for upside surprise. (This is still less than half of what was achieved in 1991). We believe the equity valuation does not come close to discounting these prospects. We would continue to buy the stock. Our price target it $34, based on a relative multiple target of 1.75 times that of the S&P 500.
DETAILS:
- Income statement line items as a percentage of sales were as follows. COGS was 54.0% vs. 52.8% last quarter and 53.1% in 2Q96, R&D 12.*% vs. 23.3% last quarter and 22.5% in 2Q 1996, and SG&A 26.4% vs. 26.9% last quarter and 48.0% in 2Q96. The operating margin was 6.8% vs. 8.0% last quarater and 10 basis above our estimate.
- During the quarter, the company introduced several upgrades to the Sequoia and Aspen platforms, the most significant of which is Native Tissue Harmonics. This technology improves image quality- by increasing image resolution and decreasing distortion in particular cardiac structures that are difficult to image, like the apex and endocardium- in the most difficult patinets, enabling the physicians to make a diagnosis.
- Doppler Tissue Imaging provides images of the heart muscle (tissues in the heart cavity) by using Doppler signal processing to color encode wall motion instead of blood flow or pressure, providing the ability to measure the myocardial wall velocity. MICROSON High Resolution Imaging "enables cardiologists to study the motion of the heart wall with superior detail and resolution." ViewPro Image Review Software provides off-line review and reporting of echo exams. Additionally, the company introduced several new transducers for pediatric/neonatal (8Vrc) and vascular uses (6L3 and 8L5) and a transducer for measuring brachial ateries (15l*), an emerging application primarily for researchers.
Hope this is helpful,
Larry
P.S. Question: what is SG&A? COGS?? |
