Chinese medical devices maker,
Mindray Medical International Limited
) posted adjusted earnings per share of 53 cents in the 2014-second
quarter, down 1.9% from 54 cents a year ago. The figure, however,
inched past the Zacks Consensus Estimate by a penny.
Also, reported earnings decreased 2% to 50 cents per share from 51
cents per share in the 2013-quarter or 3.9% to $59.6 million from
$62.1 million in the year-ago quarter.
Second-quarter net revenues stood at $334.5 million, reflecting a
rise of 8.9% from $307.2 million in the year-ago quarter.
International sales (contributing 54.4% to total revenues)
continued to be stronger than domestic sales.
International revenues escalated 13.9% to $182.0 million while
revenues from China grew at a slower pace of 3.4% to $152.5 million
owing to a sluggish Chinese healthcare sector. Revenues from
certain key emerging markets were affected by unfavorable foreign
exchange and political issues.
Patient Monitoring & Life Support Products
edged up 1.8% to $119.3 million, contributing 35.7% to overall net
revenues in the second quarter of 2014. Revenues from
In-Vitro Diagnostic Products
went up 11.3% to $98.3 million, contributing 29.4% to net revenues.
Reagents sales accounted for 41.2% of this segment's net revenues.
Medical Imaging Systems
spiked 11.2% to $84.6 million, contributing 25.3% to net revenues.
(including sales from the orthopedics business, service revenues
from extended warranties, sales of accessories and repair service
revenues for post-warranty period) zoomed 26.3% to $32.2 million,
contributing 9.6% to overall net revenues.
Adjusted gross profit rose 7.1% to $191.2 million but adjusted
gross margin deteriorated 90 basis points (bps) to 57.2% in the
Adjusted operating earnings went down 2.9% to $67.9 million, while
operating margin deteriorated 250 bps to 20.3% from 22.8% in
second-quarter 2013 on account of higher operating expenses.
MR had $915.6 million in cash and cash equivalents and short-term
investments as of Jun 30, 2014, down 25.7% from $1,232.3 million as
of Dec 31, 2013. Total bank loans fell 44.2% to $265.4 million from
$475.7 million as of Dec 31, 2013.
For the first six months ended Jun 30, 2014, cash flow from
operating activities came in at $104.3 million, down 12.1% from
$118.6 million in the same period of 2013. Capital expenditure rose
26.9% to $51.1 million from $40.2 million in the first half of
MR lowered its 2014 financial guidance in face of the weakness in
China and some key emerging markets in the first half of the year.
The company expects 2014 net revenues to grow at least 10% over
2013, lower than the earlier guidance of 15%. The Zacks Consensus
Estimate for the same is currently pegged at $1,391 million.
The company now apprehends 2014 adjusted net income to decrease by
mid-single digits over 2013 as against the prior projection of
in-line figures. Capital expenditure is expected around $130
million for 2014, as against the prior expectation of $160 million.
MR posted decent year-over-year growth in revenues during the
second quarter of 2014 and also beat our estimates on the earnings
front. However, we are disappointed with the year-over-year fall in
earnings. Besides, the lowered guidance for 2014 also fails to
indicate any near-term catalyst that may improve the scenario in
the coming period.
The Chinese healthcare market continues to grow at a sluggish pace
which, in turn, impacted domestic revenues during the quarter.
Operating earnings also posted a decline owing to soaring expenses.
Nevertheless, the long-term fundamentals of the healthcare markets
remain solid. With consistent efforts to strengthen its sales,
marketing, distribution and product development capabilities, we
believe that MR is poised to achieve sustainable growth.
Currently, MR carries a Zacks Rank #3 (Hold). Better-ranked stocks
in the medical instruments industry include Alphatec Holdings, Inc.
), RTI Surgical Inc. (
) and Accuray Incorporated (
). While Alphatec Holdings and RTI Surgical sport a Zacks Rank #1
(Strong Buy), Accuray carries a Zacks Rank #2 (Buy).
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