Sometimes it can be difficult to suss out the reasons behind stock movements. To some point, I suppose it doesn't matter -- green or red is ultimately all that most people care about. So maybe investors sold IntermagneticsGeneral (NASDAQ:IMGC) Tuesday because they didn't like the quarter. Or maybe they didn't like the plans for restructuring, or the lack of a real update on the power business. Or maybe it's selling off because it was rather expensive to begin with.
Whatever the case may be, revenue was up 12%. In the core MRI and medical device units, it rose about 6% and 21%, respectively, while revenue in the still essentially research-oriented energy technology business dropped 40%.
That's all fairly straightforward, but things get a little murkier on the profit side. In addition to using generally accepted accounting principles, the company uses a method it calls "normalized," which takes away the impact of stock compensation expense, acquisition charges, discontinued operations, and so on. There's nothing wrong with this, per se, but investors need to make sure they compare "apples to apples." In any event, whichever numbers you choose to use, gross margins slid a bit and operating margins improved.
It seems there's still some consternation out there about the health of the MRI market, and of course that would affect these shares. Sometimes, though, the responses are a little strange.
For instance, it is true that Medicare recently cut payments to stand-alone imaging clinics, but I'm not sure that's such a big deal for Intermagnetics -- a lot of its sales (through Philips (NYSE:PHG)) are international, and even domestically, stand-alone clinics aren't such a large part of its business. Furthermore, reductions in reimbursements don't always lead to a straight-line reduction in spending on new equipment.
I'll be curious to see what the company ultimately decides to do with its energy technology business (and the superconducting wire products therein). Intermagnetics seems committed to a "liquidity event" for the unit and has hired an investment bank. I'm not sure that an event like a spinoff would necessarily unlock tremendous value, but it would at least make the investment choice or choices much clearer -- separating a stable and dependable medical franchise from a high-risk/high-reward energy technology opportunity.
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Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).
