Greatbatch reported mixed third-quarter 2014 results. Although
earnings comfortably surpassed the Zacks Consensus Estimate,
revenues were in line with the same. We are particularly encouraged
with the company's raised 2014 revenue and adjusted earnings per
share guidance. Greatbatch continues to execute on its growth
strategies via strategic investments, manufacturing efficiencies,
operating cost containment and volume leverage. With the
acquisition of CCC Medical Devices, Greatbatch aims at enhancing
its medical device innovation efforts in the Neuromodulation space.
However, the company continues to face significant foreign currency
headwinds and persistent weakness in the portable medical product
line, both of which may pressurize the top line. Considering these
factors, we maintain our Neutral recommendation and set a price
target of $51.00.
Greatbatch, Inc. (GB), headquartered in Clarence, N.Y., is a
leading producer and supplier of batteries, capacitors, and
components used in implantable medical devices (IMDs). The company
also produces batteries for commercial and industrial applications
such as oil and gas exploration, oceanographic equipment, seismic
surveying equipment, and others. The National Aeronautics and Space
Administration (NASA) uses Greatbatch batteries in various aspects
of its aerospace programs.
Greatbatch realigned its operating segments in 2013. Its
businesses are now divided into Greatbatch Medical and QiG.
The company reported total revenues of $664 million in 2013, up
2.7% year over year. Total revenues for nine months ended Oct 3,
2014 stood at $518.1 million, up 6.3% year over year.
The Greatbatch Medical segment (99.2% of total revenues in the
first nine months of 2014) includes the former Implantable Medical
and Electrochem Solutions segments, excluding QiG.
The larger Implantable Medical business designs and manufactures
medical devices and components for the cardiac, neuromodulation,
vascular and orthopaedic markets. It offers complete medical
devices including design, development, manufacturing, and
regulatory submission. The business also offers individual
components for implantable medical devices as well as value-added
assembly and design engineering services for its component
products. Examples of these components include batteries,
capacitors, filtered and un-filtered feedthroughs, machined
components, enclosures, leads, introducers, catheters, as well as
orthopaedic implants, instruments and cases and trays.
The smaller Electrochem business designs and manufactures total
power solution for critical applications with market-leading
original equipment manufacturers (OEMs), largely in the portable
medical and energy space. Electrochem offers its customers
components, consultation, design, development and testing for
medical device applications in high-value markets, including those
that support the transition of delivery of health care from
clinical to outpatient and home settings, as well as those that
enhance the quality of life for an aging population. Examples of
these devices include powered surgical tools, automated external
defibrillators, portable ultrasound devices, portable oxygen
concentrators, and ventilators, among others. Electrochem provides
cell and battery pack configurations for rechargeable and
non-rechargeable battery power systems, charging and docking
stations, and power supplies, for devices where failure is not an
Implantable Medical customers include leading OEMs, such as
Biotronik, Boston Scientific, Johnson & Johnson, Medtronic,
Smith & Nephew, Sorin Group, St. Jude Medical, Stryker and
Zimmer. On the other hand, Electrochem's customers are primarily
companies involved in demanding markets with sophisticated total
power solutions needs, such as in the portable medical and energy
markets. Some of Electrochem's larger OEM customers are Carefusion,
Covidien, Ethicon Endo-Surgery, Halliburton, Phillips Healthcare,
Physio-Control, and Weatherford International.
The QiG segment (0.8%) develops medical device systems by
research and development in QiG. The segment invests in three areas
- new medical device systems commercialization, collaborative
programs with OEM customers, and strategic equity positions in
start-up companies - to build a diversified and distinctive
portfolio. The medical device systems developed by QiG are
manufactured by Greatbatch Medical.
Greatbatch Inc. (GB): Read the Full Research
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