) revealed that it has signed an agreement to acquire Vital Signs
division of GE Healthcare for $500 million that will not only
expand its Specialty Disposables business under the Procedural
Solutions segment internationally but establish itself as a
leader in the $3 billion market for respiratory and anesthesia
consumables. Following the announcement, share price of the
company rose 0.7% till yesterday.
Vital Signs, with annual revenues of $250 million, manufactures
single-patient-use consumables for respiratory care and
anesthesiology as well as distributes products for temperature
management and patient monitoring consumables. It operates in
three locations globally, including manufacturing operations in
CFN generates one-third of its revenues outside the U.S. With the
acquisition of Vital Signs business, CareFusion will be able to
expand its global scale and provide more than 20,000 single-use
consumables for respiratory care and anesthesiology, including
circuits for oxygen and anesthesia, humidification, masks,
filters, pressure infusers and temperature management products.
The acquisition is expected to result in synergies of $10 to $15
million per annum on a pretax basis by fiscal 2017. It is
expected to be neutral to modestly accretive to CareFusion
adjusted earnings per share in fiscal 2014 and accretive in
fiscal 2015 by 5 to 8 cents, excluding amortization of acquired
intangible assets, non-cash inventory valuation step-up charges,
and nonrecurring restructuring, integration, and tax charges.
Further, CFN expects continued earnings accretion in fiscal 2016
CareFusion will acquire the Vital Signs business in the U.S.,
China and other countries by Dec 31, 2013. The company expects to
finalize the remainder of the transaction during its third
quarter, ending Mar 31, 2014. Vital Signs will be the eighth
acquisition of CFN since 2010.
CareFusion, a Zacks Rank #3 (Hold) stock, posted flat adjusted
earnings per share of 44 cents for the first quarter of fiscal
2014 compared with the comparable quarter a year ago but exceeded
the Zacks Consensus Estimate of 40 cents. Adjusted net earnings
fell marginally by 3% to $96 million from $99 million a year ago.
Revenues in the quarter dipped marginally by nearly 1% (both in
reported and constant currency) to $830 million, topping the
Zacks Consensus Estimate of $818 million. The decrease was driven
by fall in Medical Systems revenues.
Revenues from its Procedural Solutions rose 7% $306 million,
driven by double-digit revenue increases in both the Medical
Specialties and Specialty Disposables businesses. Segment profit
rose 2.4% to $42 million, driven by higher gross margin that was
partially offset by increased investments in R&D. On an
adjusted basis, segment profit grew 8.3% to $52 million from $48
million in the prior-year quarter.
For fiscal 2014, CFN continues to expect revenues to grow between
1% and 4% on a constant currency basis. Adjusted earnings are
also expected to lie in the previously guided range of $2.30 to
$2.40 per share.
The guidance is based on an assumed weighted average outstanding
share count of approximately 215 million, which includes the
impact of expected share repurchases during fiscal 2014.
Some better-ranked stocks that worth a look in the medical
products industry include
Hill-Rom Holdings, Inc.
). Hill-Rom and NuVasive carry a Zacks Rank #1 (Strong Buy),
while Exactech carries a Zacks Rank #2 (Buy).
CAREFUSION CORP (CFN): Free Stock Analysis
EXACTECH INC (EXAC): Free Stock Analysis
HILL-ROM HLDGS (HRC): Free Stock Analysis
NUVASIVE INC (NUVA): Free Stock Analysis
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