We downgrade our recommendation on
Mindray Medical International Limited
) to Neutral. Its third-quarter 2012 adjusted (excluding one-time
expenses other than stock-based compensation expense) earnings
per share of 39 cents missed the Zacks Consensus Estimate of 41
Revenues were up sharply 17.7% year over year to $257.1
million, in the third quarter, missing the Zacks Consensus
Estimate of $268 million. During the reported quarter, Mindray
recorded ex-China sales of $139.4 million, up 11.6% year over
year. Revenues in China increased 25.9% year over year to $117.7
million in the reported quarter. The company performed well in
Mindray is a bellwether in the Chinese MedTech industry with a
solid international presence. A key distinction with domestic
competitors is that the majority of Mindray's products have CE
Mark and/or Food and Drug Administration ("FDA") clearance.
Mindray maintains a decent product pipeline. New products
contribute in a major way to Mindray's revenues. The company
typically introduces a dozen or so fresh products each year.
The company has entered the premium segment globally, where
its competitive advantage is still unclear. Also, on the negative
side, health care reform in China and the U.S. may reduce demand
for Mindray's products. Competition is fierce and leads to price
erosion over time.
Mindray's competitors, in different niche segments, include GE
Healthcare, a part of
). We are currently Neutral on the stock. The stock currently
retains a Zacks #4 Rank, which translates into a short-term
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