CR Bard Inc.
) first-quarter 2013 adjusted earnings of $1.44 per share beat
the Zacks Consensus Estimate by a penny. Adjusted earnings
exclude one-time items such as acquisition-related expenses ($0.7
million), asset impairment charges ($5.7 million) and litigation
expenses ($25.8 million). Although adjusted earnings declined
11%, it was within the company's previously announced guidance.
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In the quarter, net income was $90.7 million (or $1.08 a share),
down 35% from the year-ago quarter, mainly due to the
aforementioned one-time expenses.
Revenues inched up 1% both in terms of reported and constant
currency on a year-over-year basis to $740.3 million. Revenues
surpassed the Zacks Consensus Estimate of $738 million. Foreign
currency rate positively impacted sales by about 20 basis points
year over year.
On a geographic basis, revenues in the U.S. were roughly flat at
$498.5 million. However, international sales grew 3% both in
terms of reported and constant currency to $241.8 million, led by
healthy sales in emerging markets.
Revenues from the core Vascular segment decreased 3% year over
year to $203.2 million. Within Vascular, endovascular sales fell
3%, with Biopsy sales declining 4%. Electrophysiology ("EP")
revenues dropped 1%. EP Lab system sales jumped 30% led by solid
sales in the emerging markets, while disposable EP sales declined
6%. Surgical graft sales were down 10% due to soft OEM orders.
Revenues from peripheral PTA increased 9%. Vena Cava Filter sales
grew 7% in the reported quarter. This was quite a turnaround from
the 12% decline in the sequentially prior quarter. Revenues from
the stent franchise dipped 13% year over year, as the Japanese
competitor, which pulled back its product line last year,
returned to the market. However, it was flat sequentially,
reflecting pricing and competitive pressure.
Sales from the Urology division increased 2% to $188.8 million.
We note that the company is experiencing healthy sales from
Medivance, which it acquired a year ago. Revenues from the basic
drainage division were up 3%. I.C. Foley sales dropped 5% and 1%
in the U.S and international markets, respectively, as these
segments faced continued pricing pressure.
Continence segment's sales were down 5% in the reported quarter.
Neurological specialties sales were down 5% due to a 9% fall in
brachytherapy sales. Revenues from the StatLock catheter
stabilization line declined 1% in the quarter.
The company's Oncology segment reported revenue growth of 4% year
over year to $207.1 million. Sales of peripherally inserted
central catheters (PICC) increased 5%, while revenues from the
Port franchise inched up 1%. Revenues from the Vascular Access
ultrasound products and dialysis catheter products line increased
5% and 8%, respectively, in the reported quarter.
Sales from Surgical Specialties business were up 5% at $120.3
million, led by the Neomend acquisition. Soft tissue repair
business grew 3% due to an unexpected 11% growth in natural
tissue products sales. Revenues from the hernia fixation business
were down 11% and that from the performance irrigation business
Sales from Other segment dropped 5% (down 6% in constant
currency) year over year to $20.9 million.
On an adjusted basis, gross margin was 60.4%, down 130 basis
points (bps) from the prior-year quarter, mainly due to timing
issues. Marketing, selling, and administrative expenses (as a
percentage of sales) increased 150 bps to 29.2%. This was driven
partly by the medical device excise tax and the rest because of
increased spending on investment plans focused on emerging
Research and development expenses, as a percentage of sales,
increased to 8% from 6.6% in the year-ago quarter. Reported
operating margin was 17.2% versus 26.2% in the year-ago quarter.
CR Bard ended the first quarter of 2013 with cash, restricted
cash and short-term investments of $905.3 million, down 1.7% on a
sequential basis. Total debt remained flat at $1.4 billion.
Moving ahead, C.R. Bard expects similar sales performance for the
second quarter of 2013 as in the first quarter due to difficult
year-over-year comparisons and several headwinds. On the earnings
front, the company expects adjusted earnings in the range of
$1.35 to $1.39 a share. The current Zacks Consensus Estimate for
the quarter is $1.46.
Although CR Bard managed to beat estimates this quarter, we
remain concerned over the sluggish growth rate in the U.S.,
despite improvement in the broad market. Further, we remain on
the sidelines unless its recent investment strategies to increase
profitability pay off. Its recent acquisitions and initiatives to
expand into emerging markets should boost growth in the long-term
but we see no near-term catalysts.
Moreover, the company's claim that the Gore litigation is moving
toward a positive direction and is about to complete instills
confidence. However, there is always a degree of uncertainty
related to legal matters.
The stock carries a Zacks Rank #4 (Sell). While we remain on the
sidelines regarding CR Bard, companies like
), carrying a Zacks Rank #1 (Strong Buy), as well as
The Cooper Companies Inc.
MWI Veterinary Supply, Inc.
), which carry a Zacks Rank #2 (Buy), are expected to do well in
the medical/dental supply industry.