We are maintaining our Neutral recommendation on
) following its performance in the second-quarter 2012.
Adjusted (excluding one-time expenses) earnings per share
improved 23% year over year to 43 cents and revenues rose 3.5%
(down 0.4% organically) to $189.7 million. However, both fell short
of the Zacks Consensus Estimates.
Revenues grew on the back of solid sales in the Arthroscopy
business, while all other businesses partially dampened sales.
Conmed also lowered its 2012 guidance based on the softness in the
capital equipment market due to global economic headwinds. For
2012, the company expects revenues in the band of $765 million and
$775 million while earnings forecast remains in the range of $1.75
to $1.85 per share.
In spite of the downer in the second quarter, we believe that
Conmed, through its robust pipeline, is poised to drive its
top-line in the years ahead. We are optimistic about the company's
performance going forward, given its recent distribution deal with
Musculoskeletal Research Foundation (MTF), the largest tissue bank
in the world, and its acquisition of Massachusetts-based healthcare
company Viking Systems.
While the MTF pact is expected to be accretive to Conmed's
earnings for 2012 by roughly 15 cents to 18 cents a share, the
takeover of Viking Systems is expected to be accretive to Conmed's
earnings from 2013 onwards.
We derive comfort from the increasing trend of using minimally
invasive techniques, as a large percentage of the company's
products are designed for these procedures. Moreover, the
initiation of a cash dividend policy reflects positively on its
However, companies like
Johnson & Johnson
Smith & Nephew
) with greater resources and larger research and development
budgets, pose significant competitive pressure. Further, the shift
in hospital capital spending is bound to act as a drag on Conmed's
results in the near-term.
Conmed's exposure to pricing pressure, economic softness and
volatile fluctuations in foreign currency remain additional
challenges. However, foreign exchange movements had no impact on
the company's revenues in the most recent quarter due to its
In the end, we remain on the sidelines despite the positives and
watch over Conmed's multiple. Our Neutral recommendation on the
stock is backed by a short-term Zacks #3 Rank (Hold).
CONMED CORP (CNMD): Free Stock Analysis Report
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