On Mar 27, we retained
) at Neutral, following its mixed fourth-quarter results.
Although it managed to grow at a double-digit rate in the quarter
in terms of both the top and bottom line, Greatbatch continues to
face operational hazards.
Why the Retention?
On Feb 25, Greatbatch posted fourth-quarter 2012 adjusted
earnings per share of 53 cents, which beat the Zacks Consensus
Estimate of 50 cents and significantly exceeded the year-ago
adjusted earnings of 39 cents (up 36% year over year). The
increase was led by gross margin expansion along with controlled
Revenues grew 12% year over year to $159.2 million in the fourth
quarter but missed the Zacks Consensus Estimate of $163 million.
Accretion from the recent acquisitions of about $20.3 million and
growth in the vascular business offset the organic constant
currency decline of 2% due to lower Cardiac and Neuromodulation
Over the trailing four quarters, the company missed the Zacks
Consensus Estimate, with a negative average surprise of 0.45%.
However, following the release of the fourth-quarter results, the
Zacks Consensus Estimate for 2013 and 2014 moved up 2.6% and
19.4% to $1.97 and $2.22 per share, respectively. Currently, the
company retains a Zacks Rank #3 (Hold).
Greatbatch is primarily a producer and supplier of batteries,
capacitors, and components used in implantable medical devices
(IMDs). Its top customers include leading players such as
St. Jude Medical
). We believe that long-term partnerships with such large OEM
companies along with acquisitions and new products should ensure
long-term growth for the company.
However, Greatbatch has been struggling to remediate operational
hazards at its Swiss orthopedic facilities, which were leading to
loss. Despite the struggle, management believes that results
should improve from the first quarter of 2013 based on the
restructuring initiatives. Although the news is encouraging, we
remain on the sidelines until the company shows clear signs of
improvement. Additionally, a sluggish CRM market is likely to
remain a drag on the top line.
Other Stocks to Consider
While we remain on the sidelines for Greatbatch, semi-discretes
) with a Zacks Rank #2 (Buy) warrants a look.
CREE INC (CREE): Free Stock Analysis Report
GREATBATCH INC (GB): Free Stock Analysis
MEDTRONIC (MDT): Free Stock Analysis Report
ST JUDE MEDICAL (STJ): Free Stock Analysis
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