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Solid Numbers, Few Suprises

This name reported positive third-quarter results and we would consider adding to our position on a pullback.
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Stereotaxis (STXS) announced solid third-quarterresults overnight. This Alert is an update on the companyand we're not recommending any trades for the model portfolio.

Excluding one-time charges, Stereotaxis lost $0.08 a sharein the quarter, which was a penny ahead of the consensusestimate. Revenue grew 4.5% from the previous year to $13.9million and also exceeded expectations. Excluding payingdown $1.6 million of debt during the quarter, the companyburned through just $100,000 of cash from operations.

At $5.7 million, recurring revenue once again set a newquarterly record, on which Stereotaxis generated 88%margins. Demand for the company's Odyssey system alsocontinues to grow, with the pipeline for this product havingincreased more than 70%. In addition, management recentlyhired Pierre Rivaux, who previously headed IntuitiveSurgical's (ISRG) sales and marketing department, inan attempt to expand its own presence overseas. As vicepresident, Europe, Middle East, Africa (EMEA), Rivaux willlead the company's EMEA operations and sales efforts.

There was little surprise in the numbers as management hadpreannounced lower revenue expectations last month becauseof supplier delays. Looking ahead to 2011, given the reboundin capital orders, Stereotaxis sees high single-digitrevenue growth and gross margins approaching 70%. Withoperating expenses expected to be between $59 million and$61 million, the company should be close to profitability bythe end of the year.

The stock is trading fractionally lower today, recentlychanging hands around $3.90, as the broader market averagesare down from the highs of the morning. As a result, wewould consider buying an additional 200 shares if the stockpulls back another $0.10 to $0.15 from current levels.

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