Despite a 3.8% rise, Greatbatch's 2013-fourth quarter earnings per
share of $0.55 missed the Zacks Consensus Estimate by a penny.
Revenues of $176.6 million grew 11.0% and were in line with the
mark. We appreciate the company s effort to become a provider of
complete medical devices system by heavy investment on R&D.
Furthermore, the company's product pipeline looks healthy. However,
we are cognizant regarding softness in the smaller Electrochem
division. The company also faces significant customer concentration
risks. As such, we have downgraded the recommendation to Neutral
from Outperform and set a target of $47.00 on the stock.
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
buisneeses are now divided into Greatbatch Medical and QiG.
The Greatbatch Medical segment (99.5% of total revenues in 2013)
includes the former Implantable Medical and Electrochem Solutions
segments, excluding QiG. The larger Implantable Medical buisness
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 buisness designs and manufactures total
power solution for critical applications with market-leading
original equipment manufacturers (OEMs), largely in the portable
medical and energy space. The division acquired Ore.-based battery
supplier, Micro Power Electronics, to gain access to its rich
product portfolio, which complements Electrochem's offerings for
the portable medical, energy, military and environmental
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 option.
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 (0.5%) 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
GREATBATCH INC (GB): Free Stock Analysis Report
To read this article on Zacks.com click here.