Why Tornier NV Shares Soared

Why Tornier NV Shares Soared

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 Tornier N.V. , a medical device company that manufactures joint replacement and soft tissue solutions to restore patient mobility, skyrocketed as much as 22% after reporting its second-quarter earnings results.

So what: For the quarter, it was actually more of the same for Tornier with a wider-than-expected quarterly loss of $0.28 as it ramps up its product line and begins expanding internationally with its sales. Its lower-extremities segment delivered the biggest year-over-year growth of 114%, primarily from its OrthoHelix acquisition, while its large-joint division disappointed with a 4% decline in sales. However, the real reason shares seem to be getting such a lift is the company's third-quarter and full-year guidance, which fell right in line with the Street's expectations. Looking ahead, Tornier expects to grow revenue by 13% to 16% to a range of $314 million to $322 million in fiscal 2013 (adjusted for currency exchange rates) with EBITDA of $33 million to $37 million. The Street's current revenue consensus for the year is $316.7 million.

Now what: Following multiple quarters of failing to meet expectations, the fact that sales are picking up and EBITDA is projected to remain in double-digits as a percentage of revenue (10.5% to 11.5%) is a positive sign. But, as you know, I much prefer to see bottom line results before I would ever suggest chasing a big gainer like Tornier even higher. With profitability still seemingly two or three years off and its international business -- which I see as a key to its success -- still a relatively small piece of the pie, I'd rather stick to the sidelines and watch this device maker from a distance.

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