Optos Plc (OPTS), the maker of the Daytona retinal imaging device, fell the most in 10 months after saying second-quarter earnings will be lower than anticipated because the diagnostic tool is selling more slowly than it forecast.
“Interest in the device continues to build, but sales are softer than we had hoped for at this stage,” the Dunfermline, Scotland-based company said today in a statement. Software enhancements mean that “some customers are waiting to order machines, which has contributed to lower sales in the first half.”
The stock declined as much as 18 percent, wiping away its gain this year, in the biggest drop since May 2012. Optos traded down 13 percent at 174.5 pence as of 12:22 p.m., the second- biggest decline on the FTSE All-Share Index.
Optos is beginning to deliver 250 Daytonas on rental contracts to OPSM Group Ltd., an optometry chain in Australia and New Zealand owned by Luxottica Group SpA (LUX), adding to 160 of the eye-care devices installed for the company last year. The deal means that a greater proportion of the desktop retinal evaluation tools will be rented, Optos said.
“A greater weighting toward rentals, versus capital sales, means that net debt has increased,” Charles Weston, an analyst at Numis Securities, said today in a note. The London-based analyst cut his share recommendation to add from buy, and reduced his price prediction to 200 pence from 300 pence.
Weston reduced his sales estimate for 2013 by 7.5 percent to $191.3 million and said pretax profit may be $17.5 million, down from a prediction of $27.7 million because of “high operating leverage.”
Even so, “clinical evidence for the use of ultra-widefield imaging is strong and building,” Weston said. The technology will be increasingly adopted worldwide, implying that Optos shares are already worth more than 300 pence, he said.
The company’s primary products generate high-resolution digital images of about 82 percent of the retina, something no other device can do in a single image, according to Optos’s website. That aids early detection and treatment of eye disorders and diseases.
Optos shares offer a potential 12-month return of almost 50 percent, according to the average of five analyst estimates compiled by Bloomberg. Six of 10 analysts recommend buying the shares, including Julie Simmonds at Canaccord Genuity, who reiterated her rating today and has a price target of 312 pence.
Optos said its expectations for the full year are unchanged, though earnings will be weighted more to the second half than previously anticipated. Revenue adjusted for some items beat the average analyst estimate last year, as did operating profit and earnings per share. The company’s fiscal year finishes at the end of September.
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