Nanosonics (ASX:NAN) share price up 28% after earnings beat and new product announcement

It has been a great day for the Nanosonics share price…

| More on:
excitement surrounding asx share price rise represented by man holding slip of paper and making happy, fist up gesture

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The Nanosonics Ltd (ASX: NAN) share price has been an outstanding performer on Tuesday.

In afternoon trade, the infection prevention company's shares are up a massive 28% to $7.52.

Though, despite this impressive gain, the Nanosonics share price is still down 9% year to date.

Why is the Nanosonics share price rocketing higher?

The catalyst for the rise in the Nanosonics share price today has been the release of its full year results and the announcement of a new product.

In respect to the former, for the 12 months ended 30 June, the company reported a 3% increase in revenue to $103.1 million and a 15% decline in net profit after tax to $8.6 million. The latter was well ahead of the market's expectations, which goes some way to explaining the incredible rise by the Nanosonics share price today.

This stronger than expected result was driven by a significant recovery in the second half of the financial year. For example, management revealed that its second half revenue increased 39% over the first half.

Looking ahead, based on current trading conditions remaining consistent, management expects double-digit revenue growth in FY 2022.

What else is lifting its shares?

Also giving the Nanosonics share price a lift was the announcement of another new product – Nanosonics Coris.

The company expects Nanosonics Coris to transform the cleaning of flexible endoscopes. It notes that more healthcare-associated outbreaks have been linked to contaminated endoscopes than any other medical device.

It also notes that there's a huge potential market opportunity. There are over 60 million flexible endoscopy procedures being conducted across the United States and the largest five markets in Europe alone every year and growing at 6% per annum.

Regulatory approval is still required and the company is currently targeting the first commercial launch to occur in calendar year 2023.

How does this compare to expectations?

The team at Goldman Sachs has been running the rule over the result. It notes that Nanosonics thoroughly outperformed the market's earnings expectations.

It commented: "Revenue grew +3% vs. Visible Alpha consensus' +0%, as a +2% beat in consumables more than offset the (6)% miss in capital. As flagged at 1H21, performance benefited from the resumption of orders from GE after sharp de-stocking at the start of the pandemic (c.50% of NAN sales). Earnings fell (15)% but came in materially ahead of consensus ($8.6m vs. $5.3m; +62%), almost entirely driven by an SG&A beat of +$3m ($53.6m vs. $57.0m)."

However, despite what the Nanosonics share price performance today might indicate, Goldman notes that the company's guidance is below expectations.

It explained: "As widely expected, NAN saw a recovery in business performance in 2H (EBIT $0m in 1H21). Assuming the positive trend continues, NAN targets double digit growth in FY22, but the company expects FY22 gross margin to reduce from 78% (albeit remain >75%), and for operating expenses to approximate $90m."

"For context, we currently forecast FY22 sales growth of +29%, gross margin of 78.6% and operating expenses of $80m. Assuming our sales forecast is correct, guidance implies (30)% downgrades to our FY22E EBIT forecast," it added.

Goldman also gave feedback on the company's new product.

It said: "Notably, the company has confirmed that the long-awaited new product platform (Coris) will be a cleaning device for flexible endoscopes (the consensus expectation). NAN quantifies the market at 60m procedures per annum (US & EU-5), with growth of +6%. However, the launch date has again been delayed, potentially by up to 18 months (now targeting CY23, from FY22 previously), which will be a further disappointment to the market."

The broker currently has a sell rating and $4.93 price target on the Nanosonics share price. Though, that could change in the coming days once it has updated its financial model to reflect today's release.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and has recommended Nanosonics Limited. The Motley Fool Australia owns shares of and has recommended Nanosonics Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on Share Gainers

The silhouettes of ten people holding hands with their arms raised against the sky, as the sun rises or sets in the background.
Share Gainers

Here are the top 10 ASX 200 shares today

Investors were nervous this Friday, ending the week on a sour note.

Read more »

A young man punches the air in delight as he reacts to great news on his mobile phone.
Share Gainers

Why EOS, Evolution Mining, Renascor, and Woodside shares are jumping today

These shares are ending the week on a high. But why?

Read more »

Fancy font saying top ten surrounded by gold leaf set against a dark background of glittering stars.
Share Gainers

Here are the top 10 ASX 200 shares today

It was a volatile, but negative day for ASX investors this Thursday.

Read more »

Woman with an amazed expression has her hands and arms out with a laptop in front of her.
Share Gainers

Guess which ASX 200 stock turned $5,000 into $34,264 in just three years!

Investors have been piling into this ASX 200 stock for years, sending the share price soaring.

Read more »

Overjoyed man celebrating success with yes gesture after getting some good news on mobile.
Share Gainers

Why Beach Energy, Meeka Metals, Monash IVF, and Qantas shares are racing higher today

These shares are having a better day than most on Thursday. But why?

Read more »

Rising gold share price represented by a green arrow on piles of gold block.
Share Gainers

2 ASX All Ords stocks that would already have more than doubled your money this year

These ASX All Ords stocks have gained 126% and 145% year to date. But how?

Read more »

Ten smiling business people wave to the camera after receiving some winning company news.
Share Gainers

Here are the top 10 ASX 200 shares today

It was an historic day for the ASX, with the market setting a new record.

Read more »

Man drawing an upward line on a bar graph symbolising a rising share price.
Share Gainers

Why Fletcher Building, Johns Lyng, Pilbara Minerals, and Zip shares are charging higher

These shares are having a strong session on hump day. But why?

Read more »