) saw a marginal rise in adjusted net earnings to $14.9 million
or 53 cents per share for the fourth quarter of 2013 from 52
cents per share in the same quarter of 2012. Earnings per share
exceeded the Zacks Consensus Estimate by 4 cents.
BARD C R INC (BCR): Free Stock Analysis
BECTON DICKINSO (BDX): Free Stock Analysis
CARDINAL HEALTH (CAH): Free Stock Analysis
CONMED CORP (CNMD): Free Stock Analysis
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For full year 2013, adjusted net earnings fell 1.7% to $50.8
million from $51.7 million a year ago but earnings per share rose
0.6% to $1.81 from $1.80 in 2012 and surpassed the Zacks
Consensus Estimate by 5 cents.
Revenues in the quarter went up 1.1% (2.1% on a constant currency
basis) to $203.4 million, in line with the Zacks Consensus
Estimate. The increase was attributable to stronger economy and
higher procedure rates. Revenues in the U.S. inched up 0.4% while
international revenues increased 1.7%, comprising 50.5% of
Revenues from orthopedic surgery rose 2.2% on a constant currency
basis. Under this product line, sports medicine devices and
tissue revenues went up 3.4%, while powered instruments revenues
were nearly flat compared with the prior year.
Revenues from surgical visualization rose 5.6%, both on a
reported and constant currency basis, due to higher sales in the
export markets. Revenues from general surgery were up 1.2% in
For the full year 2013, revenues increased marginally by 0.6% to
$762.7 million. Revenues from orthopedic surgery were flat
compared with the prior year. Revenues from sports biologics
product line escalated 5.4%, driven by good progress with the MTF
Revenues from surgical visualization slipped 0.9% in the year,
mainly driven by a weak capital environment and a delayed product
launch due to the integration of Santa Barbara and Westborough,
Mass. locations following CONMED's acquisition of Viking in Sep
of 2012 and the movement of product manufacturing to other
Revenues from general surgery sales rose 0.5% in 2013, with
growth in both single-use and capital products on a constant
currency basis. Revenues from both GI and pulmonary and
endomechanical product lines went up more than 2% in 2013.
Gross margin in the quarter went up 150 basis points (bps) to
54.8%. After adjusting for the restructuring costs, gross margin
in the fourth quarter rose 120 bps to 55.8% from 54.6% in the
same quarter of 2012.
Adjusted operating margin in the quarter rose 70 basis points to
12.2% excluding the medical device tax for comparability. For the
full year, adjusted operating margin improved 40 bps to 11.1%.
CONMED exited the year with cash and cash equivalents of $54.4
million, which is more than double compared to $23.7 million at
the end of 2012. Long-term debt (inclusive of current portion)
increased 33.2% to $215.6 million from $161.9 million as of Dec
31, 2012. Consequently, long-term-debt-to-capitalization ratio
rose 510 bps to 26.2% from 21.1% as of Dec 31, 2012.
In 2013, operating cash flow declined 15.0% to $80.9 million
versus $95.2 million in the prior year. Capital expenditures
(net) fell 6.4% to $18.4 million from $19.7 million in 2012.
Dividend and Share Repurchase
CONMED's Board of Directors declared a quarterly cash dividend of
20 cents per share, paid on Jan 6, 2014. This quarterly dividend
reflects a 33% rise from the prior dividend of 15 cents per
share. With this, CONMED returned about $22.5 million to
shareholders through cash dividends annually.
In 2013, CONMED repurchased nearly 1.6 million shares at an
average price of $32.04. In addition, the company instituted a
10b-5 plan in December last year to repurchase additional shares
under the existing board repurchase authorization.
Since the beginning of 2014, CONMED repurchased an additional
400,000 shares for $16.8 million. With this, the Board's
remaining share repurchase authorization stands at $37 million,
which may be revised in the first half of the year.
For the 2014-first quarter, CONMED expects revenues in the band
of $191-$196 million. Meanwhile, adjusted earnings per share are
expected between 45 and 49 cents for the quarter.
For 2014, CONMED anticipates revenues in the range of $770 to
$780 million reflecting a 1-2% rise from 2013 based on continued
single use products sales growth and improved capital products
sales. It compared with the Zacks Consensus Estimate of $780
Adjusted earnings per share are anticipated between $1.90 and
$2.00 compared with the Zacks Consensus Estimate of $1.91. The
expected EPS implies a 5-10.5% rise from 2013. Adjusted operating
and EBITDA margins are expected to improve 50 bps in the year.
Despite the beat, we are disappointed with CONMED's marginal rise
in fourth quarter earnings. The persistent dismal macroeconomic
conditions along with poor capital spending loom as causes of
concern. Moreover, the company operates in a highly competitive
orthopedic surgery market against much larger and more
technically competent companies. However, improving surgical
procedure growth, and better guidance trigger optimism about the
stock at the same time.
Currently, CONMED carries a Zacks Rank #3 (Hold). Some
better-ranked stocks in the medical/dental supplies industry
Cardinal Health, Inc.
CR Bard Inc.
Becton, Dickinson and Company
). All these stocks carry a Zacks Rank #2 (Buy).