On Jul 8, we retained
) at Neutral, following its solid first-quarter 2013 results. In
spite of the upbeat performance, we remain on the sidelines given
the uncertain healthcare environment.
Why the Retention?
Hanger's adjusted earnings of 28 cents per share for the first
quarter surpassed the Zacks Consensus Estimate by 12%. Profit of
this orthotic and prosthetic (O&P) company grew 10.5% to $9.5
million (or 27 cents a share), primarily led by strong sales and
Revenues increased 7.1% year over year to $233.5 million in the
quarter, marginally beating the Zacks Consensus Estimate of $233
million. It led to record sales of above $1 billion for the
company, trailing 12 months. While, the core Patient Care segment
is growing on the back of increased same-center sales, the
Distribution business is facing headwinds in the form of
unfavorable weather and tough year-over-year comparisons.
The company's earnings have also managed to beat the Zacks
Consensus Estimates in the last 4 quarters with an average
surprise of 5.87%. Following the earnings release, the Zacks
Consensus Estimate for 2013 has moved up by 1.5% to $2.09 per
share. For 2014 too the Zacks Consensus Estimate increased
significantly (up 3.9% to $2.40 per share).
Hanger enjoys a sovereign position in the orthotic and prosthetic
(O&P) market and continues to gain market share. The company
is focusing on expanding its geographical footprint and revenues
through complementary acquisitions. In addition, to derive better
results from its market strategy from 2013, the company realigned
its reporting segments.
However, Hanger remains affected by a host of macro issues
including sequestration, and measures (including Medicare and
Medicaid reimbursement cuts) adopted by the state governments to
cover budget deficits. Moreover, the impact of the medical
devices tax is pressurizing the company's margins. These factors
are apprehended to weigh on Hanger's results going forward.
Other Stocks to Consider
Other large-cap medical products companies such as
Essilor International SA
Edwards Lifesciences Corp.
) are expected to do well in the medical industry. All these
stocks carry a Zacks Rank #2 (Buy).
ESSILOR INTL SA (ESLOY): Get Free Report
EDWARDS LIFESCI (EW): Free Stock Analysis
HANGER ORTHOPED (HGR): Free Stock Analysis
RESMED INC (RMD): Free Stock Analysis Report
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