Boston, MA 08/11/2014 (wallstreetpr) – Financial advisor Goldman Sachs Group Inc (NYSE:GS) had reduced its price target on the shares of medical technology firm Volcano Corporation (NYSE:VOLC). The brokerage, however, had retained its rating on the company’s stock. The action comes after the company revealed its financial numbers for the second quarter.
Slashes Price Tag
Analyst David Roman had reduced his price objective to $18 from $20 on the shares of Volcano Corporation (NYSE:VOLC) based on lower estimates derived from the estimated sales for the year 2015 and discounted cash flow. Despite the reduction in the price target, the stock still offered an upside potential of 43.3% based on the closing price of $12.56 on Friday’s regular trading session.
Goldman Sachs Group Inc (NYSE:GS) said that the weakness was seen during the second quarter results due to weak IVUS console sales, i.e. 10% of sales while the other divisions delivered results in line with its estimations. Therefore, the brokerage had updated its model to reflect lower sales during the outer years, additional pressure on gross margin, and selling, generation and administration apart from research and development assumptions. These were expected to impact earnings per share profitability in the estimation of the next year 2015, as well as, the year 2016.
Rating of Stock
The analyst disclosed that it had been compelled to reduce its forward outlook on Volcano taking into consideration the uneven execution pattern adding to more uncertainty. Therefore, David Raman felt pressured with limited visibility on stabilization path in its core franchises. As such, he had retained his rating of Neutral on the stock.
The brokerage said that it was looking for clarity on the long-term objectives and factors during the analyst meeting to fuel improvement in the results.
Comments On 2Q Results
Goldman Sachs Group Inc (NYSE:GS) said that Volcana’s revenue of $102.6 million was a tad below its estimation of $104.1 million and consensus’ $103.2 million due to continued pressures in the core IVUS systems in the U.S., and disposable franchises in Japan. The company’s top line, excluding forex, decelerated 3.0 percentage points during the second quarter over the first quarter and 7.5 percentage points compared to the second quarter of 2013. Its gross margin too dipped 1.2 percentage points to 63.2% though EBIT margin expanded one percentage point on a year-over-year basis.
