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Why Intersect ENT Is Down Big Today

By Brian Feroldi – Aug 2, 2019 at 2:38PM

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Shares dropped after the company reported second-quarter results that missed the mark, and cut guidance.

What happened

Shares of Intersect ENT (XENT), a medical device company focused on products that treat ear, nose, and throat problems, are down 17% as of 2:10 p.m. EDT on Friday. The huge drop is attributable to disappointing quarterly results.

So what

Here are Intersect ENT's headline numbers from the quarter:

  • Revenue rose 1% to $26.7 million. That was slightly behind Wall Street's estimate.
  • Gross margin improved by 200 basis points to 81%.
  • Operating expenses jumped 33% to $33.7 million.
  • Net loss more than doubled to $11.4 million, or $0.36 per share. That was worse than the $0.34-per-share loss analysts were expecting.
  • Cash balance at quarter-end was $93.5 million.

The worse-than-expected quarterly results were bad enough, but management poured salt on the wound by cutting guidance, too:

  • Full-year revenue is now expected to be about flat, at $108.5 million. That's down from Intersect's prior range of $113 million to $117 million.
  • 2019 operating expenses are still expected to land between $135 million and $137 million.
Businessman at laptop giving the thumbs-down sign

Image source: Getty Images.

Given the poor results and guidance cut, it's no surprise to see shares getting whacked again.

Now what

Intersect ENT recently hired Tom West as its new CEO. West has been in the medical device industry for a long time and has held executive roles at Hologic and at Johnson & Johnson, so he seems to be a good fit to turn this business around.

If West can return Intersect ENT to growth, then shares could be viewed as a bargain today. However, that's easier said than done. That's why my plan remains to root for Intersect's success from the safety of the sidelines, and to be willing to jump in only after we see clear signs that the recovery is taking hold.

Brian Feroldi has no position in any of the stocks mentioned. The Motley Fool recommends Johnson & Johnson. The Motley Fool has a disclosure policy.

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