Why NxStage Medical Inc. Shares Slumped

Why NxStage Medical Inc. Shares Slumped

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 NxStage Medical , a medical device maker that focuses on treating diseases of the kidney, slumped as much as 19% after reporting disappointing third-quarter earnings results.

So what: For the quarter, NxStage Medical delivered a 9% increase in revenue to $66.9 million as adoption of its NxStage System One improved. Modest gains were witnessed in all operational segments, including at-home, critical care, and in-center care. Net loss, however, nearly doubled to $5 million, or an adjusted $0.08 per share, from $2.6 million, or $0.04 per share, in the year-ago period. By comparison, Wall Street anticipated a narrower loss of $0.06 and about $66.8 million in revenue.

Looking ahead, though, is where the wheels fell off the wagon. NxStage sees fourth-quarter revenue of $67 million to $68.5 million with an adjusted EPS loss of $0.08-$0.10. The current consensus called for a loss of just $0.05 per share on $71.5 million in revenue. The reason for the weaker guidance, according to Matthew Towse, NxStage's chief financial officer, is due to a lower ramp up of international sales and weaker domestic critical care sale expectations.

Now what: Here we are once again with a company that looks like an attractive buy on paper, but that's failing to deliver the goods to shareholders on a consistent basis. With 25.3 million people in this country currently having diabetes, and diabetes being a leading cause of kidney problems, I can only assume that as baby boomers age NxStage is going to see a tremendous surge in demand for its devices. In the interim, though, NxStage is going to continue to disappoint investors until it can pare its losses and return to high single-digit growth or better. With that in mind I'm perfectly happy adding NxStage Medical to my watchlist, but I'd suggest waiting for growth to reaccelerate before considering an investment here.

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The article Why NxStage Medical Inc. Shares Slumped originally appeared on Fool.com.

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.The Motley Fool owns shares of, and recommends NxStage Medical. 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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Originally published