On April 8, we have updated our research report on
). We are concerned about the softness in the smaller
Electrochem division and significant customer concentrations
risks but remain optimistic about the company's effort to become
a provider of complete medical devices system by heavy investment
Despite a 3.8% rise, GB's 2013-fourth quarter earnings of 55
cents missed the Zacks Consensus Estimate by a penny. Net
revenues in the quarter improved 11.0% (13% on an organic
constant currency basis) to $176.6 million, which was almost in
line with the Zacks Consensus Estimate of $176.0 million.
The increase in revenues was attributable to higher
cardiac/neuromodulation and orthopaedic product lines sales
driven by market share gains due to increased sales and marketing
investment, customer product launches and the release of backlog
owing to the Swiss consolidation.
These positive factors affecting revenue growth were partially
offset by an 18% decline in portable medical sales due to the
difficult comparable versus the year-ago quarter as well as
pricing discipline, which led to a loss of some low-margin
For 2014, GB expects revenues in the range of $685 to $705
million, reflecting a 3 to 6% rise over 2013. The Zacks Consensus
Estimate of $695 million for 2014 revenues lies within the guided
range. The company also anticipates adjusted operating margin
between 13.0 and 13.3%, reflecting a 50 to 80 bps rise from 2012.
Finally, GB expects adjusted earnings per share in the range of
$2.25-$2.35, indicating a 7 to 12% rise over 2013. The Zacks
Consensus Estimate of $2.33 lies within the guided range.
GB expects to grow through its efforts to develop innovative
medical devices and build a healthy product pipeline. The
company's acquired complementary businesses have added new
proprietary technologies, manufacturing capabilities, and
development resources, apart from broadening its customer base.
However, GB faces significant customer concentration. In 2013,
its top three customers,
Johnson & Johnson
St. Jude Medical Inc.
) collectively accounted for 49% of the company's total sales
Currently GB carries a Zacks Rank #3 (Hold).
GREATBATCH INC (GB): Free Stock Analysis
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