LeMaitre Vascular (LMAT) is trading sharply down today (-18%) after lowering Q3 revenue guidance and providing initial Q4 guidance that is below market expectations. In case you're not familiar, LeMaitre Vascular is a provider of medical devices and human tissue cryopreservation services for the treatment of peripheral vascular disease (PVD), which affects 20 mln people globally.
PVD encompasses a number of conditions in which the arteries or veins that carry blood to or from the legs, arms, or organs other than the heart become narrowed, obstructed, weakened etc. In many cases peripheral vascular disease goes undetected, sometimes leading to strokes, ruptured aneurysms or death.
LMAT sells vascular devices to address the needs of vascular surgeons. Its portfolio of peripheral vascular devices consists of brand name products that are used in arteries and veins outside of the heart and are well known to vascular surgeons, and includes the HYDRO Expandable LeMaitre Valvulotome, the XenoSure biologic patch, the Pruitt F3 Carotid Shunt and VascuTape Radiopaque Tape.
This is an intensely competitive industry dominated by big players such as MDT and BCR, as well as smaller companies such as CSII. However, LMAT has done a good job of navigating this space by focusing on more niche products and making selective product acquisitions.
Turning to the guidance, LMAT lowered its Q3 revenue guidance to approx $24.2 mln vs prior guidance of $25.6-26.4 mln. EPS guidance of $0.21 was in-line with prior guidance of $0.20-0.22. Operating margin in Q3 is expected to dip to 19% from 20% last year. LMAT also provided initial guidance for Q4: revenue of $25.6-26.4 mln and EPS of $0.18-0.20. Both Q4 ranges are a good bit below market expectations, especially the EPS guidance.
On an organic basis, sales in the Americas were up 2% in Q3, flat in Europe and down 5% in Asia-Pac Rim. Product growth in the quarter was driven by XenoSure and carotid shunts. The decline in sales was due in part to the April 2018 divestiture of the Reddick general surgery product lines, as well as the other factors. Of note, LMAT recently hired a Vice President of Asia-Pac Rim, opened an Asia-Pac Rim sales office in Singapore and received Australian XenoSure approval.
In sum, LMAT does not provide a lot of detail in the press release as this is just a guidance announcement and not a full earnings announcement. However, LMAT concedes that Q3 was a "frustrating and humbling" quarter. The CEO went on to say that as a 16% shareholder, he knows LMAT needs to do much better.
The stock has been mostly stuck in a sideways pattern over the past year. This was after nice stock appreciation years in 2016 and 2017. LMAT has been known as a niche-focused medical device name that puts up steady growth and has been able to expand its margins. However, it seems to have been struggling in 2018. Hopefully, after what looks like a difficult quarter in Q4, LMAT will be able to report better results in 2019.