Yesterday AngioDynamics (NASDAQ: ANGO) reported earnings (adjusted for one-time gains and losses) of $0.16 per share for its second fiscal quarter ended on November 30, 2016. The result missed analysts’ consensus expectation of $0.17 per share. Revenue also missed expectation: $86.7 million versus the $87.8 million expected.

Due to the underwhelming quarterly results, AngioDynamics reduced its full-year revenue guidance and cash flow guidance to a range of $345 million to $350 million (from a range of $352 million to $359 million). Also, the company reduced the full-year revenue guidance and free cash flow guidance to $30 million (from $35 million).

Near-Term Sales Worries

Since the yearly guidance reduction is bigger than the second-quarter miss, the move spooked the market because it implies the company sees weak sales in the next two quarters. The share price dropped 4.3% as a result.

On the conference call, the CEO clarified that the reduction was a conservative move in anticipation of continuing competition against some of its products.

The company confirmed its earnings per share forecast of $0.66 at the midpoint, which does not include any potential benefit from the new tax law. The company expects to meet its earnings target despite lower revenue because of more operational efficiency.

Differentiated Products Strong

Net sales for AngioDynamics’ BioFlo and AngioVac product lines grew but the sales for most other products in its Peripheral Vascular and Vascular Access segments declined.

The bright spot was the Oncology/Surgery segment, which experienced sales growth of 8.4%. The increase was primarily driven by strong demand for its new Solero Microwave Tissue Ablation system

Gross margin for the quarter declined 130 basis points to 49.3% from 50.6% a year ago. But this is a little misleading. Excluding a $1.7 million inventory write-off for one product previously sold in Japan, the gross margin would have increased to 51.2%.

The trend is clear. AngioDynamics’ most innovative and differentiated products are experiencing growth, and the rest are lagging. The CEO reiterated on the conference call that AngioDynamics is very focused on research and development, and will have new product launches this year.

The company is also currently looking for the right deal to take over smaller companies to increase inorganic growth. The CEO did not comment on whether anything was close, however.

Long-Term Outlook Not Affected

As we noted when we first added the stock to our portfolio, the company isn’t growing at a fast rate now but the company has a plan in place that aims to boost annual sales growth to double digits by 2020.

The second-quarter miss we discuss above really is just a small one, but the downward revision of the fiscal-year 2018 guidance does suggest that management feels less confident about its competitive positioning for the next two quarters. However, management reconfirmed its earnings target for the year and its longer-term growth goal, so the one quarter hasn’t changed the big picture. Unless our reference fund BlackRock decides to significantly cut its holding, we don’t see a need to bail on ANGO.

For the time being, due to the downward guidance revision and price drop, we lower the suggested buy-up-to price to $17.50 but we think the stock price will come back.

Quick Note on TAL

Lastly, a note on TAL Education (NYSE: TAL): The stock has quickly rebounded past our suggested buy-up-to price of $32. The company will report quarterly earnings on January 25, which could cause a big move in the stock one way or another. We recommend a “hold” for now. Our readers should already have some shares.