It has been a great day for the Nanosonics share price…
The post Nanosonics (ASX:NAN) share price up 28% after earnings beat and new product announcement appeared first on The Motley Fool Australia. –
The Nanosonics Ltd (ASX: NAN) share price has been an outstanding performer on Tuesday.
In afternoon trade, the infection prevention company’s shares are up a massive 28% to $7.52.
Though, despite this impressive gain, the Nanosonics share price is still down 9% year to date.
Why is the Nanosonics share price rocketing higher?
The catalyst for the rise in the Nanosonics share price today has been the release of its full year results and the announcement of a new product.
In respect to the former, for the 12 months ended 30 June, the company reported a 3% increase in revenue to $103.1 million and a 15% decline in net profit after tax to $8.6 million. The latter was well ahead of the market’s expectations, which goes some way to explaining the incredible rise by the Nanosonics share price today.
This stronger than expected result was driven by a significant recovery in the second half of the financial year. For example, management revealed that its second half revenue increased 39% over the first half.
Looking ahead, based on current trading conditions remaining consistent, management expects double-digit revenue growth in FY 2022.
What else is lifting its shares?
Also giving the Nanosonics share price a lift was the announcement of another new product – Nanosonics Coris.
The company expects Nanosonics Coris to transform the cleaning of flexible endoscopes. It notes that more healthcare-associated outbreaks have been linked to contaminated endoscopes than any other medical device.
It also notes that there’s a huge potential market opportunity. There are over 60 million flexible endoscopy procedures being conducted across the United States and the largest five markets in Europe alone every year and growing at 6% per annum.
Regulatory approval is still required and the company is currently targeting the first commercial launch to occur in calendar year 2023.
How does this compare to expectations?
The team at Goldman Sachs has been running the rule over the result. It notes that Nanosonics thoroughly outperformed the market’s earnings expectations.
It commented: “Revenue grew +3% vs. Visible Alpha consensus’ +0%, as a +2% beat in consumables more than offset the (6)% miss in capital. As flagged at 1H21, performance benefited from the resumption of orders from GE after sharp de-stocking at the start of the pandemic (c.50% of NAN sales). Earnings fell (15)% but came in materially ahead of consensus ($8.6m vs. $5.3m; +62%), almost entirely driven by an SG&A beat of +$3m ($53.6m vs. $57.0m).”
However, despite what the Nanosonics share price performance today might indicate, Goldman notes that the company’s guidance is below expectations.
It explained: “As widely expected, NAN saw a recovery in business performance in 2H (EBIT $0m in 1H21). Assuming the positive trend continues, NAN targets double digit growth in FY22, but the company expects FY22 gross margin to reduce from 78% (albeit remain >75%), and for operating expenses to approximate $90m.”
“For context, we currently forecast FY22 sales growth of +29%, gross margin of 78.6% and operating expenses of $80m. Assuming our sales forecast is correct, guidance implies (30)% downgrades to our FY22E EBIT forecast,” it added.
Goldman also gave feedback on the company’s new product.
It said: “Notably, the company has confirmed that the long-awaited new product platform (Coris) will be a cleaning device for flexible endoscopes (the consensus expectation). NAN quantifies the market at 60m procedures per annum (US & EU-5), with growth of +6%. However, the launch date has again been delayed, potentially by up to 18 months (now targeting CY23, from FY22 previously), which will be a further disappointment to the market.”
The broker currently has a sell rating and $4.93 price target on the Nanosonics share price. Though, that could change in the coming days once it has updated its financial model to reflect today’s release.
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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended Nanosonics Limited. The Motley Fool Australia owns shares of and has recommended Nanosonics Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.