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NxStage Medical Sees Better Times Ahead

By Dan Caplinger – Nov 3, 2016 at 10:24AM

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The dialysis-services company lost less money than it expected and issued a favorable outlook for the full year.

Home-dialysis specialist NxStage Medical (NXTM) has worked hard toward making a profit, but it also hasn't hesitated to spend money in an effort to promote faster growth in the future. Coming into Thursday's third-quarter financial report, NxStage investors didn't expect the company to finish in the black, but they did hope that NxStage would give them some news they could feel optimistic about. NxStage didn't disappoint on that front, posting better sales and a narrower net loss than it had expected and also making favorable changes to its full-year guidance. Let's look more closely at how NxStage Medical did and what lies ahead for the dialysis specialist.

Image source: NxStage Medical.

NxStage sees its business getting better

NxStage Medical's third-quarter results continued the company's trends toward improvement. Revenue climbed 6% to $92 million, which was above its previous guidance for $89 million to $91 million in sales. The company posted a small net loss of just $166,000, which was far better than the $1 million to $3 million loss that NxStage had expected to suffer. That worked out to break-even earnings on a per-share basis, which outpaced the consensus forecast among investors for a $0.04 per share loss.

As we've seen for a long time now, NxStage's System One device was the main driver of its growth. In total, segment revenue climbed 15% to $71.9 million, and NxStage said that the portion of those sales devoted to home use saw an even faster sales increase of 16%. Critical care revenue from the System One device lagged slightly behind with gains of just 11%, but the total results were nevertheless encouraging.

Elsewhere, the in-center segment kept up its trend of falling revenue. Top-line figures for the segment were down by more than a quarter to just $14.5 million, as the traditional in-center business continues to wane in importance within NxStage. Sales of other products were up just 5%, but revenue from services more than doubled compared to the year-ago quarter.

CEO Jeffrey Burbank kept his focus on the future. "We continue to systematically advance one of the industry's most innovative pipelines," Burbank said, and "we're excited to be moving closer to our goals and bringing these significant advancements in renal care to patients and their care teams."

Can NxStage Medical keep looking healthier?

NxStage Medical has no doubts about its ability to keep growing into the coming year. In its CEO's words, "In addition to feeling good about a solid finish to the year, we remain confident in our outlook for 2017 and beyond, which includes targets for increasing the Company's revenue growth and profitability." With its groundbreaking research and development, NxStage is confident in its ability to keep moving forward.

NxStage's guidance showed just how promising the company thinks its future is. For the fourth quarter, NxStage expects to bring in revenue of about $92 million, which is consistent with the consensus forecast among investors. A net loss of $1 million to $2 million would also match up well with investor expectations. For the full year, however, guidance increases took revenue projections to the upper end of NxStage's previous outlook, calling for $360 million to $365 million. Net losses should be just $4 million to $5 million rather than the $7 million to $12 million range NxStage had previously expected.

Even more exciting is the news that NxStage expects to launch more features and capabilities in its next generation hemodialysis system during the current quarter. By continually demonstrating its commitment to stay on the cutting edge of the industry, NxStage hopes to keep competitors at bay and gain even more acceptance for System One.

NxStage investors didn't have a strong immediate reaction to the news, with little activity in the stock's pre-market trading following the announcement. Nevertheless, for those who see the potential in serving the dialysis market, NxStage is on track to build on its past success and keep climbing into the future.

Dan Caplinger has no position in any stocks mentioned. The Motley Fool owns shares of and recommends NxStage Medical. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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