Can Mid-Cap Lantheus Continue its 2022 Outperformance?

Key Points

• Lantheus has been on a revenue growth spurt in recent quarters, boosted by Pylarify. 
• The stock has been outperforming its index, the S&P Midcap 400, by a wide margin.
• The company reports earnings on November 3, with analysts expecting the company to top last year's results. 

Mid-cap Lantheus Holdings NASDAQ: LNTH has been on a revenue growth spurt in recent quarters, boosted by a new product called Pylarify, which helps medical professionals detect prostate cancer through imaging tests. 

Lantheus went public in June 2015, which means that it's new enough to be in that zone where stocks often post big price gains. Since its IPO, it has had an excellent history in returns. Rolling time frame price increases are as follows:

• One month: 8.76%
• Three months: 5.51%
• Year-to-date: 157.36%
• One year: 221.31%
• Three years: 56.33%
• Five years: 32.44%

That track record has drawn professional investors to Lantheus, as you can see using MarketBeat’s institutional ownership data. 

Lantheus has been forming an orderly correction since mid-September. It’s holding 23% above its 200-day moving average and was trading less than a percentage point below its 50-day line on Thursday. 

With a market capitalization of $5.25 billion, Lantheus is categorized as a mid-cap. It’s a component of the S&P 400 mid-cap index, as tracked by the SPDR S&P MidCap 400 ETF NYSEARCA: MDY. That index is down 18.32% so far in 2022. You can easily see the huge margin of difference between the index and Lantheus’ performance. 

Lantheus made a name for itself with products to diagnose and treat cancers and cardiovascular conditions. It has been profitable each year since going public. MarketBeat earnings and revenue data show a fairly consistent string of beating earnings and revenue views.

Earnings growth rates have been somewhat erratic, but that’s not uncommon in the medical industry, where a range of variables can affect year-over-year revenue increases. Earnings have grown each year except for 2020, when many elective procedures were postponed due to COVID-19 restrictions. In 2020, earnings declined nearly 60% to $0.47 per share. That rebounded slightly last year, to $0.49 per share.

But the company has put the era of declines and slow growth behind it. 

Pylarify Sales Spur Price Gains 

The June 2021 release of Pylarify set in motion a new series of price increases. For example, shares gapped up 11% in November of last year following the company’s quarterly report. Revenue increased only 15%, but earnings doubled. 

In subsequent three quarters, revenue grew between 38% and 126%, while earnings increased at triple- or quadruple-digit rates. 

In the most recent earnings report in August, Pylarify accounted for a whopping 58% of total revenue. 

In the earnings release, CEO Mary Anne Heino said, “Our record-setting financial results for the first half of 2022 reflect the strength of our strategy and our ability to drive long-term growth, Pylarify, which is firmly established as the PSMA PET imaging agent of choice. It continues to propel our growth and have a positive impact on the U.S. prostate cancer community.”

Lantheus reports its third quarter on November 3, with analysts expecting net income of $0.75 per share on revenue of $229.55 million. Both would be significant gains over the year-earlier quarter. 

Smaller Medical Stocks Leading the Way

Within its medical products sub-industry, Lantheus, along with small-cap TransMedics NASDAQ: TMDX, are the top price performers in the past 12 months. TransMedics develops and markets systems to preserve donor hearts prior to a transplant surgery. Its systems include a portable unit that keeps the donor heart warm and also provides oxygen and nutrients. 

Medtronic NYSE: MDT and Stryker NYSE: SYK are both underperforming as large-cap medical products companies that are more familiar to S&P 500 investors as index components. Stryker reports earnings on October 31. Wall Street expects earnings of $2.26 per share on revenue of $4.49 billion, which would be treats for investors, as both would mark year-over-year gains. 

As a whole, the medical products industry has been a middling performer within the broader medical sector. The biotech sub-industry, while notoriously volatile, is currently the best performer, with component stocks like Catalyst Pharmaceuticals NASDAQ: CPRS showing strong price action.