CONMED Corporation (CNMD): New Analyst Report from Zacks Equity Research - Zacks Equity Research Report

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Summary:
CONMED's 2014-first-quarter earnings of $0.49 rose 8.9% and beat the Zacks Consensus Estimate by $0.02. However, revenues continue to fall (2.7%) due to weaker sales of capital products . The company expects y-o-y rise in revenues and earnings for 2014 based on continued higher single use products sales and improved capital products sales. However, CONMED competes in the orthopedic surgery market against much larger companies amid a still weak capital purchasing environment. Lower healthcare spending in the global market is also a matter of concern. As such, we maintain our Neutral recommendation with a target of $47.00.

Overview:

Headquartered in Utica, N.Y., CONMED Corporation (CNMD) is a major medical products manufacturer specializing in surgical instruments and devices. Approximately 60% of the company's revenues are derived from products designed for the orthopedic surgery markets of arthroscopy and powered surgical instruments. CONMED markets its arthroscopy, multi-specialty endoscopic medical video systems, and powered surgical instruments through its Linvatec unit.

The company also sells products for general and other surgical specialties such as electrosurgery systems for all types of surgery, and endosurgery instruments for minimally invasive laparoscopic surgery. Patient Care products, including ECG electrodes for heart monitoring and pulse oximetry for blood oxygenation monitoring, are provided for various clinical settings.

Approximately 80% of CONMED's revenues are recurring, derived from the sale of disposable single-use products. Capital equipment (less than 20% of sales) such as powered drills and saws for surgery, electrosurgical generators, video-imaging cameras, fluid control systems, and surgical hand-pieces are marketed to facilitate the sale of the disposable products.

CONMED has 3,600 employees and several manufacturing facilities. The company distributes its products globally through its own sales network in the U.S. and internationally. It also distributes its products through specialty distributors in certain international markets. International revenues contributed roughly 50% of total sales in 2012.

Effective Jan 1, 2013, the company combined its various segments to form three categories viz. orthopedic surgery (54.1% of total sales in the first nine months of 2013), general surgery (37.5%) and surgical visualization (8.4%). The reshuffling became necessary after the acquisition of Viking, which the company acquired in 2012.

The orthopedic surgery product line includes CONMED's sports medicine instrumentation and small bone, large bone and specialty powered surgical instruments. General surgery consists of a complete line of endo-mechanical instrumentation for minimally invasive laparoscopic and gastrointestinal procedures, a line of cardiac monitoring products as well as electrosurgical generators and related instruments. The surgical visualization business includes all of CONMED's 2D and 3D imaging devices.


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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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