Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of CryoLife (NYSE:CRY), a preserver and distributor of human tissues for transplantation, advanced as much as 13% after reporting better-than-expected third-quarter results before the opening bell.
So what: For the quarter, CryoLife reported an 8% increase in revenue, hitting a record $36.3 million as product revenue jumped 11% and tissue processing revenue gained 6%. Excluding one-time charges, CryoLife's adjusted EPS for the quarter was $0.12, a 50% improvement relative to its adjusted EPS in the year-ago period and a clean $0.07 higher than what Wall Street had forecast. If there is one knock against CryoLife's cumulative results, it's that through the first nine months of the year product gross margins are down 2%, to 81% of the previous year's.
The company also favorably updated its fiscal 2013 guidance to a new profit expectation of $0.58-$0.60 from $0.24-$0.27 thanks to a lower effective tax rate and improved tissue processing revenue expectations.
Now what: All around this was a solid quarter, and certainly a nice way to rebound from its second-quarter EPS shortfall. I'm pleased to see the company bumping up its tissue processing revenue forecast, but the majority of its huge EPS boost came from a lower tax rate. With that said, while additional upside may be warranted at this reasonable forward P/E of 15, possible upside may be limited until organic growth provides the real earnings boost. For now, I'd suggest adding CryoLife to your watchlist, as it's a potential candidate to benefit from the rollout of Obamacare.
Fool contributor Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.
Try any of our Foolish newsletter services free for 30 days. We Fools don't 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.