Chinese medical devices major
Mindray Medical International Limited's
) 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 cents. Reported
net income drifted down 4.2% year over year to $35.8 million (or
30 cents per share) in the quarter.
Revenues were up sharply 17.7% year over year to $257.1 million,
in the third quarter, missing the Zacks Consensus Estimate of
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 emerging markets.
Patient Monitoring & Life Support Products (40.4% of total
sales) revenues grew 8% year over year in the reported quarter to
$103.8 million. In-Vitro Diagnostic Products (28.3% of total
revenue) revenues were $72.6 million, up 30.3%. Revenues from
reagents contributed 37.3% of In-Vitro Diagnostic segment sales
during the quarter.
Medical Imaging Systems (23.7% of total sales) sales rose to
$60.9 million, a growth of 14.4%. Other revenues (7.6% of total
revenue) were up 47.8% to $19.8 million.
Adjusted gross profit amounted to $145.2 million in the quarter,
higher 19.8% year over year. Adjusted gross margin was 56.5%
higher than 55.5% in the year-ago period.
Adjusted selling expenses were $45.8 million, or 17.8% of total
net sales, compared with 18% a year ago. Adjusted general and
administrative expenses were $23.7 million, or 9.2% of sales,
versus 8.9% a year ago. Adjusted research and development
expenses were $22.2 million, or 8.6% of sales, compared with 8.4%
in the prior-year quarter.
Adjusted operating income stood at $53.5 million in the quarter,
a year-over-year growth of 21.9%. Adjusted operating margin was
20.8%, higher than the 20.1% in the year-ago quarter.
Balance Sheet and Cash Flow
As of September 30, 2012, Mindray had $747.6 million in cash and
liquid investments, up about 40.5% from a year ago. Long-term
bank loan stood at $85.1 million, up 143.3% from a year ago. Net
cash generated from operating activities was $59.3 million in the
quarter (up 98.3% year over year) while capital expenditure
amounted to $14.4 million.
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Mindray provides guidance on a full year basis. The company
continues to forecast revenue growth of 18% or more for 2012. It
also expects adjusted net income for the year to increase by a
minimum of 15% year over year (a minimum of 15% earlier). The
guidance does not take into account any tax advantage on account
of key software enterprise status. The forecast for capital
expenditure for 2012 is under $70 million (versus $90 million
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 and brings out
several new products each year. New products contribute in a
major way to Mindray's revenues. In 2011, the company launched 13
The company has entered the premium segment globally, where its
competitive advantage is still unclear. Also, on the negative
side, health care reforms 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
). The stock currently retains a Zacks #3 Rank, which translates
into a short-term Hold rating.