CONMED Corporation
(
CNMD
) recently delivered better than expected fourth quarter results,
and management raised its guidance for 2012.
This prompted analysts to revise their estimates higher, sending
the stock to a Zacks #2 Rank (Buy).
CONMED also generated record operating cash flow in 2011, and has
decided to use its strong cash flow to reward shareholders through
a regular quarterly dividend. It currently yields a solid 2.0%.
Company Description
CONMED Corporation is a medical technology company that focuses on
surgical devices and equipment for minimally invasive procedures
and patient monitoring. Revenues in 2011 were divided as follows:
Arthroscopy: 40%
Powered Surgical Instruments: 20%
Electrosurgery: 14%
Patient Care: 9%
Endosurgery: 10%
Endoscopic Technologies: 7%
The company was founded in 1970 and has a market cap of $822
million.
Fourth Quarter Results
CONMED delivered better than expected results for the fourth
quarter on February 15. Adjusted earnings per share came in at 46
cents, beating the Zacks Consensus Estimate of 39 cents. It was a
stellar 28% increase over the same quarter in 2010.
Sales rose 1% to $185.6 million, driven by a 3% increase in
single-use products (which accounted for 78% of total sales).
Gross profit expanded from 49.4% to 52.0% of sales while the
adjusted operating margin expanded 120 basis points to 10.7%.
Raised Guidance
Following solid Q4 results, management raised its guidance for
2012. It now expects adjusted EPS between $1.75 and $1.88 on sales
of $780-$790 million. This is up from previous guidance of
$1.60-$1.70 on sales of $745-$755 million.
This prompted analysts to revise their estimates higher, sending
the stock to a Zacks #2 Rank (Buy). The Zacks Consensus Estimate
for 2012 is now $1.79, within guidance, and representing 19% growth
over 2011 EPS. The 2013 consensus estimate is currently $2.00,
corresponding with 12% EPS growth.
Returning Value to Shareholders
CONMED delivered record operating cash flow of $103.0 million in
2011. And it recently decided to use some of its strong cash flow
to return to shareholders through regular quarterly dividends.
On February 29 the company announced the initiation of a regular
quarterly dividend of 15 cents per share. That equates to a yield
of 2.0%.
Valuation
Shares trade at 16x 12-month forward earnings, a premium to the
industry median of 14x, but certainly not unreasonable given its
above-average expected growth rate. It has historically traded at
16x forward earnings.
Shares trade at just 8x cash flow, below the peer group of 10x and
its historical median of 11x.
The Bottom Line
With rising estimates, strong growth projections, a 2.0% yield and
reasonable valuation, CONMED offers investors a lot to like.
Todd Bunton is the Growth & Income Stock Strategist for
Zacks Investment
Research
and Co-Editor of the
Reitmeister Value Investor
.
CONMED CORP (
CNMD
): Free Stock Analysis Report
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