) first-quarter 2013 adjusted earnings per share (excluding
one-time expenses) of 45 cents were in line with the Zacks
Consensus Estimate. The company also surpassed the year-ago
adjusted earnings by 4.7%. Adjusted earnings would have increased
by 14.0% excluding the medical devices excise tax. The result was
within the company's earlier provided guidance.
CONMED CORP (CNMD): Free Stock Analysis
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Adjusted earnings exclude one-time items such as severance and
relocation costs as well as certain consolidation and legal
charges. Total one-time expenses amounted to $2.4 million in the
Reported profit of the medical technologies and surgical devices
company (including the one-time expenses) grew 5.3% to $10.5
million (or 37 cents per share) in the quarter.
Revenues dropped 3.8% year over year to $187.0 million as a
result of fewer selling days, foreign exchange fluctuations and
soft healthcare spending in international markets. Revenues
missed the Zacks Consensus Estimate of $201 million by 7%. It
also failed to meet the company's revenue guidance of $192-$198
million, announced in the previous quarter.
On a geographic basis, sales in the U.S. and international
markets (50.5% of total sales) dropped by 3.6% and 3.9% (3.2% in
constant currency), respectively.
In addition, single-use products sales (79% of total sales)
dipped 3.4% in constant currency to $147.8 million and capital
offerings (21% of total sales) also declined 3.4% to $39.2
million in the quarter.
The company has integrated its various segments into three
categories viz. orthopedic surgery, general surgery and surgical
visualization. The reshuffling became necessary after the
acquisition of Viking, which the company acquired in 2012.
The orthopedic surgery product line include sports medicine group
and power surgical instruments of CONMED. Revenues from this
product line declined 1.7% in the quarter to $105.0 million due
to 3.3% drop in sports medicine product sales, partially offset
by 1.1% growth in powered surgical instruments
CONMED had combined its electrosurgery, endosurgery, endoscopic
technologies and patient care into the general surgery
categorization. Revenues from the general surgery product group
fell 3.9% to $66.8 million.
Revenues from the surgical visualization line, which includes all
2D and 3D imaging devices, dropped 15.6% to $15.2 million, mainly
on account of tough year-over-year comparisons.
Gross margin rose to 54.9% in the first quarter of 2013 from
51.9% in the year-ago quarter. Operating margin was 8.5% versus
8.8% in the prior year quarter as positive impact of an
improvement in the cost structure was dampened by the medical
devices excise tax. On an adjusted basis, operating margin
increased 70 basis points to 11.2% of sales.
Selling and administrative charges were higher at 41.6% of sales
compared with 38.5% in the year-ago quarter, led by foreign
exchange rates and several headwinds affecting the top line.
Research and Development expenses, as a percentage of sales, were
down at 3.0% of sales versus 3.7% in the prior-year quarter, as
the company successfully completed certain R&D projects.
CONMED exited the first quarter of 2013 with cash and cash
equivalents of $32.4 million, up 66.2% year over year. Long-term
debt (inclusive of current portion) increased 16.9% year over
year to $225.9 million. Operating cash flow was flat year over
year at $5.5 million in the quarter, representing 2.9% of sales
in the first quarter.
CONMED repurchased 0.8 million shares in the quarter amounting to
$25.7 million and plans to repurchase an additional $25 million
shares over the year.
CONMED expects second quarter 2013 adjusted earnings in a range
of 41 cents to 46 cents. Revenues are projected to remain in the
band of $191 million and $196 million. The current Zacks
Consensus Estimates for revenues and earnings per share in 2013
are $197 million and 49 cents, respectively.
CONMED reiterated its earnings guidance outlook for 2013 on the
back of improving gross margins, despite the negative impact of
the medical device excise tax and foreign exchange fluctuations.
It expects adjusted earnings to be in the band of $1.80 and $1.90
per share for 2013, reflecting 5% growth in earnings per share.
However, management lowered its top line guidance owing to the
difficult austerity measures persisting in Europe as well as
flattish healthcare utilization rate in the U.S., despite an
improvement in the broad U.S. economy. In addition, the surgical
video visualization product line is adversely affected by
constrained hospital spending for capital equipments in Europe
and other international markets. As a result, management lowered
its estimated 2013 sales forecast to $770-$780 from $785-$795
million predicted earlier.
The current Zacks Consensus Estimates for revenue and earnings
per share for full year 2013 are $766 million and $1.85,
CONMED is a medical products maker, specializing in surgical
instruments and devices. Although the company has been able to
maintain its bottom line on the back of solid margins and
effective tax rate, this might not be sustainable over the long
haul. This is because of the declining revenue trend which the
company is experiencing in 2013.
Ongoing dismal macroeconomic conditions along with poor capital
product sales and sluggish volume/procedure growth are a worry.
Moreover, CONMED operates in a highly competitive orthopedic
surgery market against much larger, more technically-competent
companies. However, a large percentage of the company's products
are designed for minimally invasive surgery, a trend that is
The company carries a Zacks Rank #3 (Hold). While we remain on
the sidelines regarding CONMED, 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.