CareFusion Corporation (CFN): New Analyst Report from Zacks Equity Research - Zacks Equity Research Report

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Summary:
CareFusion reported strong first-quarter fiscal 2015 results wherein both earnings and revenues improved year over year and also exceeded our expectations. We believe that revenues will continue to accelerate riding on synergies from the Vital Signs acquisition and continued momentum in the Dispensing Technologies business. CareFusion's products are considered among top-spending priorities of healthcare providers and the company is poised to grow on new product launches. Moreover, the impending merger with Becton, Dickinson is expected to generate significant synergies going forward. However, the company remains exposed to pricing and utilization headwinds in certain end-markets. Additionally, regulatory concerns and intensifying competition will remain an overhang on the stock. As such, we recommend the shares as Neutral and set a target of $63.00.


Overview:

San Diego, CA based CareFusion Corp was incorporated on Jan 14, 2009 in anticipation of spinning off from leading nation-wide drug distributor Cardinal Health. The spinoff was completed on Aug 31, 2009. The company offers products in the areas of medication management, infection prevention, operating room (OR) effectiveness, respiratory care and surveillance and analytics. These products help hospitals improve the safety and quality of care.

CareFusion reported total revenues of $3.8 billion in fiscal 2014, reflecting year-over-year growth of 8.2%. The company has two reportable segments - Medical Systems and Procedural Solutions.

The Medical Systems segment (57.3% of total revenues in the first quarter of fiscal 2015) deals with medical equipments. The segment manufactures capital equipment and related products for medication management, including infusion and medication dispensing technologies, supply dispensing technologies and respiratory technologies. Its infusion systems products include IV medication safety and infusion therapy delivery systems, such as dedicated disposables, software applications and related patient monitoring equipment (Alaris brand). Its dispensing technologies products include automated dispensing machines and related applications for distributing and managing medication and medical supplies (Pyxis and Rowa brands). Its respiratory technologies products include respiratory ventilation equipment and dedicated circuits for respiratory therapy, and equipment for respiratory diagnostics (AVEA, Vela, and LTV Series brands).

The Procedural Solutions segment (42.7%) deals with disposable products and reusable surgical instruments. The segment manufactures single-use skin antiseptic and other patient-preparation products, non-dedicated IV infusion administration sets and accessories, reusable surgical instruments and non-dedicated ventilator circuits and other disposables used for respiratory therapy. Its business lines are infection prevention, medical specialties, and specialty disposables. The infection prevention lineup includes single-use skin antiseptic (ChloraPrep brand) and other patient-preparation, hair-removal and skincare products and non-dedicated disposable IV infusion administration sets and accessories (MaxPlus, MaxGuard and SmartSite brands). The medical specialties lineup includes surgical instruments (V. Mueller and Snowden-Pencer brands), interventional specialty products, such as diagnostic trays and biopsy needles, drainage catheters and vertebral augmentation products. The specialty disposables lineup includes disposable ventilator circuits and oxygen masks used for respiratory therapy (Air Life brand).

CareFusion is currently in the process of being acquired by Becton, Dickinson for $58.00 per share in cash and stock, or a total of approximately $12.2 billion. The deal, revealed by the companies on Oct 5, 2014, is expected to close by mid-2015. As a result of the proposed merger, CareFusion suspended its current share buyback programs.

CareFusion's fiscal year ends on Jun 30.


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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.




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