ArthroCare Beats on Both Top and Bottom Lines

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ArthroCare (NAS: ARTC) reported earnings on May 2. Here are the numbers you need to know.

The 10-second takeaway
For the quarter ended March 31 (Q1), ArthroCare beat expectations on revenues and beat expectations on earnings per share.

Compared to the prior-year quarter, revenue grew and GAAP earnings per share grew significantly.


Gross margins shrank, operating margins were steady, net margins dropped.

Revenue details
ArthroCare booked revenue of $92.9 million. The five analysts polled by S&P Capital IQ predicted revenue of $88.2 million on the same basis. GAAP reported sales were 5.6% higher than the prior-year quarter's $87.9 million.

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Source: S&P Capital IQ. Quarterly periods. Dollar amounts in millions. Non-GAAP figures may vary to maintain comparability with estimates.

EPS details
EPS came in at $0.46. The five earnings estimates compiled by S&P Capital IQ forecast $0.34 per share. GAAP EPS of $0.43 for Q1 were 19% higher than the prior-year quarter's $0.36 per share. (The prior-year quarter included $0.01 per share in earnings from discontinued operations.)

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Source: S&P Capital IQ. Quarterly periods. Non-GAAP figures may vary to maintain comparability with estimates.

Margin details
For the quarter, gross margin was 71.3%, 60 basis points worse than the prior-year quarter. Operating margin was 18.9%, about the same as the prior-year quarter. Net margin was 14.0%, 50 basis points worse than the prior-year quarter.

Looking ahead
Next quarter's average estimate for revenue is $92.5 million. On the bottom line, the average EPS estimate is $0.38.

Next year's average estimate for revenue is $361.4 million. The average EPS estimate is $1.38.

Investor sentiment
The stock has a one-star rating (out of five) at Motley Fool CAPS, with 136 members out of 272 rating the stock outperform, and 136 members rating it underperform. Among 107 CAPS All-Star picks (recommendations by the highest-ranked CAPS members), 43 give ArthroCare a green thumbs-up, and 64 give it a red thumbs-down.

Of Wall Street recommendations tracked by S&P Capital IQ, the average opinion on ArthroCare is outperform, with an average price target of $31.00.

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At the time this article was published Seth Jayson had no position in any company mentioned here at the time of publication. You can view his stock holdings here. He is co-advisor ofMotley Fool Hidden Gems, which provides new small-cap ideas every month, backed by a real-money portfolio. Try any of our Foolish newsletter services free for 30 days. We Fools may not 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.

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