On Oct 8, we reiterated our Neutral recommendation on
Mindray Medical International Limited
). Although the medical device company's domestic sales remain
robust, it is currently facing a difficult environment in
developed international markets.
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Why the Retention?
On Aug 5, Mindray posted a 17.8% rise in second-quarter 2013
adjusted earnings per share to $0.53 from $0.45 a year ago and
met the Zacks Consensus Estimate. Net revenues grew 14.7% to
$307.2 million but missed the Zacks Consensus Estimate of $319
The company's earnings have beaten the Zacks Consensus Estimate
in 2 out of the last 4 quarters, while meeting the same in the
last reported quarter, thus maintaining an average surprise of
5.42%. Following the earnings release, the Zacks Consensus
Estimate for 2013 earnings inched up 1.5% to $2.01 and then 1.0%
to $2.03 per share. However, the estimate for 2014 earnings
declined 1.8% to $2.20 and then 0.9% to $2.18 over the same
Furthermore, the acquisition of ZONARE in July has led management
to raise its year-over-year rise in revenues guidance to at least
18% from 17%. However, MR reiterated adjusted net earnings
guidance, anticipating at least 15% rise over 2012.
Mindray is a bellwether in the Chinese medical devices industry.
The company has a large domestic sales infrastructure, which
gives it better access to medium-sized county hospitals. In
China, it beats other multinationals on price and defeats local
players, who have cheaper products, on brand recognition.
In western markets, MR targets mid-market and price-sensitive
customers. Although it has entered the premium segment globally,
its competitive advantage is still unclear. Uncertainties in
healthcare reforms in the U.S. have reduced demand for Mindray's
products. Moreover, competition is fierce and threatens price
erosion over time.
Other Stocks to Consider
Medical instruments stocks that warrant a look include
MAKO Surgical Corp.
). All these stocks carry a Zacks Rank #2 (Buy).