Medical technologies major
C R Bard, Inc.
) disappointed by posting a 20.3% fall in net earnings to $114.7
million in the 2013-fourth quarter from $143.9 million in the
year-ago quarter and a 16.5% decrease in earnings per share to
$1.42 from $1.70 in the fourth quarter of 2012. Nevertheless,
earnings per share beat the Zacks Consensus Estimate by 3
On reported basis, CR Bard's earnings increased to $667.5 million
or $8.28 per share in the quarter from $128.2 million or $1.52
per share in the year-ago quarter.
Revenues in the quarter increased 4% (both on reported and
constant exchange rate or CER) to $791.3 million and comfortably
outpaced the Zacks Consensus Estimate of $779.0 million. On a
geographic basis, revenues in the U.S. grew 4% to $517.7 million,
while revenues outside the U.S. rose 3% to $273.6 million.
Excluding the impact of foreign currency, revenues outside the
U.S. increased 3% from the prior year.
Revenues from the emerging markets continue to increase and
represented about 8.5% of BCR's total revenue in the fourth
quarter. During the quarter, BCR sold its electrophysiology
division, which affected revenue growth in the quarter,
particularly outside the U.S.
For full year 2013, net adjusted earnings decreased 16.0% to
$474.9 million and 12.0% to $5.78 per share from $565.3 million
and $6.57 per share in 2012. With this, earnings per share
exceeded the Zacks Consensus Estimate of $5.75.
Revenues in the year inched up 3% to $3,049.5 million (both on
reported and constant currency basis), which is higher than the
Zacks Consensus Estimate of $3,036 million.
Adjusted gross profit declined marginally to $480.7 million in
the quarter from $481.2 million in the fourth quarter of 2012.
Adjusted gross margin fell 50 basis points (bps) to 60.8% due to
impacts of pricing pressure, amortization and foreign currency.
For full-year 2013, adjusted gross margin dipped 100 bps to 61%
due to headwinds from foreign exchange, amortization and pricing
Product Group Results
Revenues from the core
category decreased 3.4% (4% at CER) to $204.7 million. Sales in
the U.S. and outside the U.S. dipped 4% and 5%, respectively. The
decline in revenues was attributed to the divestiture of
Electrophysiology business. Excluding the impact of divestiture,
Vascular sales grew 2% in the quarter.
Revenues from vascular graft went down 4% but Endovascular
business rose 2% in the fourth quarter. Within Endovascular
business, biopsy line revenues went up 7%, driven by strong
international growth, especially in the emerging markets.
Peripheral PTA product revenues were up 7% in the quarter with
drug-coated balloons in Europe being the key driver of growth.
Revenues from vena cava filter line increased 12% driven by new
Denali filter. However, revenues from Stent business went down 7%
due to continued price headwinds.
Revenues from the
business increased 3.4% to $202.4 million, both in terms of
reported and constant currency. Revenues from the U.S. went up
4%, while it grew 3% internationally. The acquisition of
Rochester Medical in November last year contributed to 200 basis
points in global growth for this product category.
Within Urology, revenues from the basic drainage business
increased 3%, with half of the growth generating from the
acquired Rochester medical products. I.C. Foley's revenues were
up 4% globally with a 1% fall in the U.S. Due to the Rochester
acquisition, revenues from continence business grew 4% over the
prior year quarter.
Revenues from urological specialties went down 4% with a 1%
rise in brachytherapy revenues. Revenues from StatLock catheter
stabilization line grew 3% in the quarter.
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Revenues from the
category rose 4.7% to $220.4 million, both in reported and CER
basis. Revenues were up 3% in the U.S. and 9% outside the U.S.
Revenues from port line were up 1%. Revenues from peripherally
inserted central catheters (PICC) grew 11% in the quarter with
strong performance in the U.S. and abroad. However, revenues from
Vascular Access ultrasound product line dipped 6% in the quarter
due to a tough comp a year ago. Lastly, revenues from dialysis
catheter business rose 2% in the fourth quarter.
business escalated 15.9% (both in reported and CER) to $140.6
million. Revenues from the U.S. increased 17% while international
revenues were up 13%. About 10 percentage points of the global
growth was attributed to business development, which included the
acquisition of Arista Hemostat product line.
Revenues from soft tissue repair business grew 6% in the quarter,
while synthetic hernia products revenues rose significantly
(double-digit) versus the last year's quarter. Revenues from
natural tissue products were down 5% in the quarter, Fixation
business declined 5%, and Performance Irrigation business fell 5%
in the quarter.
product line increased marginally (roughly 1%) to $23.2 million
from $23.0 million in the fourth quarter of 2012.
CR Bard ended the fourth quarter with cash, restricted cash and
short-term investments of $1.1 billion versus $801 million as of
Sep 30, 2013. Total debt was $1.4 billion as of Dec 31, 2013
versus $1.5 billion as of Sep 30, 2013. Debt to total capital
ratio was roughly 40% as of Dec 31, 2013.
Capital expenditures amounted to $21.8 million for the quarter
and $69.1 million for the year. The annual capital expenditure
was about $20 million lower than BCR's original guidance.
CR Bard repurchased about 1.4 million shares of the company stock
in the quarter, including a portion of the Gore proceeds. The
company also announced an additional $500 million authorization
for its share buyback program. It has returned over $800 million
to shareholders in 2013 with an average price of $112.53.
For 2014, C.R. Bard expects revenues to grow between 6% and 8% at
CER, assuming revenues of $130 million-$140 million from Gore
royalties. The company expects to record a modest level of sales
due to its multiyear transition supply agreement with
Boston Scientific Corp.
), until the latter integrates manufacturing into their
Considering the product categories, BCR expects revenue growth
between 5% and 8% for the Vascular line, 5% and 8% for the
Urology line, 2% and 5% for the Oncology line, 7% and 10% for the
surgical specialties line, and 5% and 10% in the other category.
During the year, C.R. Bard expects adjusted earnings per share
between $8.20 and $8.30. The current Zacks Consensus Estimate of
$7.51 lies below the guided range.
C.R. Bard expects capital expenditures between $100 million and
$120 million for 2014. It also expects operating cash flow of
roughly $700 million in the year.
BCR expects gross margin to improve between 30 and 60 bps from
the prior year. This includes between 160 and 170 bps of benefit
due to the estimated royalty from Gore and 50 bps of favorability
from estimated cost savings.
For the first quarter of 2014, BCR expects adjusted earnings
between $1.83 and $1.87 per share compared with the Zacks
Consensus Estimate of $1.76. Revenues for the quarter are
expected to grow between 6% and 7%, including the royalty payment
Although CR Bard managed to beat estimates this quarter, we
remain concerned about the stringent sales environment facing the
company, particularly in the U.S. Moreover, some of Bard's
businesses are experiencing significant pricing and competitive
pressures and low-single digit growth in international markets.
We thus remain on the sidelines at present till the time its
recent investment strategies help to increase profitability.
However, we believe its recent announcement to divest the EP
business along with initiatives to expand into emerging markets
should boost growth in the long term.
BCR currently carries a Zacks Rank #3 (Hold). Some better-ranked
stocks in the medical/dental supply industry include
Align Technology Inc.
) with a Zacks Rank #1 (Strong Buy) and
Cardinal Health, Inc.
) with a Zacks Rank #2 (Buy).