Mixed 1Q for CNMD, Tweaks Guidance - Analyst Blog


CONMED Corporation ( CNMD ), a medical technologies and surgical devices company, reported first quarter fiscal 2012 adjusted earnings of 43 cents per share, missing the Zacks Consensus Estimate by a penny. The company, however, managed to surpass the year-ago earnings of 37 cents a share. Adjusted earnings exclude one-time expenses of $2.2 million.

Profit in the reported quarter was roughly $10 million (or 35 cents per share) compared with a profit of $9 million (or 31 cents per share) in the year-ago quarter.

During the quarter, the company became the sole marketing agent of Musculoskeletal Transplant Foundation's (MTF) sports medicine allograft tissues.

On April 25, 2012, CONMED introduced a cash dividend policy and paid 15 cents a share as quarterly dividend.


Revenues rose 5.9% (1.8% organic) year over year to $194.3 million beating the Zacks Consensus Estimate of $192 million. Growth was backed by healthy sales across Arthroscopy and Endoscopic Technologies businesses, which were partially dampened by the decline in the Electrosurgery and Patient Care franchises.

On a geographic basis, revenues in the international markets were $98.2 million. Foreign exchange rates had no impact on revenues.

Segment Analysis

Revenues from the core Arthroscopy segment increased 14.3% year over year (up 13.7% in constant currency) to $86.2 million. Revenues from Endosurgery and Endoscopic Technologies division grew 1.7% and 7.6%, to $18.2 million and $12.8 million, respectively.

However, revenues from Electrosurgery and Patient Care dropped 4.7% and 3.6%, to $22.5 million and $16 million, respectively. Sales from Powered Surgical Instruments inched up 1.3% year over year to $38.6 million.


Gross margin dipped to 51.9% in first quarter 2012 from 52.2% in the year-ago quarter. Operating margin declined to 8.8% from 9.4% in the prior-year quarter.

Selling and administrative charges were higher at 38.5% of sales compared with 38.2% in the year-ago quarter. Research and Development expenses, as a percentage of sales, were 3.7% versus 4.2% in the year-ago quarter.

Balance Sheet

CONMED exited first quarter 2012 with cash and cash equivalents of $19.5 million, up 8.4% year over year. Long term debt (inclusive of current portion) increased 5.3% year over year to $193.2 million.


The company expects adjusted earnings to be in the range of 42 cents to 47 cents for the second quarter of 2012. Revenues are forecast to remain in the band of $190 million and $195 million for the second quarter of 2012.

CONMED revised its guidance for fiscal 2012 based on the company's soft capital equipment sales. The company expects adjusted earnings to be in the range of $1.75 to $1.85 (earlier $1.75 to $1.88) per share for fiscal 2012. Revenues are forecast to remain between $775 million and $785 million (earlier $780 million to $790 million) for fiscal 2012.

The adjusted earnings forecast for the second quarter and fiscal 2012 exclude restructuring costs associated with the transfer of manufacturing activities to the company's manufacturing plants in Chihuahua, Mexico and Largo, Florida, from Santa Barbara, California.

CONMED is a medical products maker, specializing in surgical instruments and devices. A large percentage of the company's products are designed for minimally invasive surgery, a trend that is extremely popular these days.

The company operates in a highly-competitive orthopedic surgery market against much larger, more technically-competent companies, such as Johnson & Johnson ( JNJ ), Smith & Nephew ( SNN ) and Stryker Corporation ( SYK ). Currently, we are Neutral on CONMED, backed by a short-term Zacks #3 Rank (Hold).

CONMED CORP ( CNMD ): Free Stock Analysis Report
JOHNSON & JOHNS ( JNJ ): Free Stock Analysis Report
SMITH & NEPHEW ( SNN ): Free Stock Analysis Report
STRYKER CORP ( SYK ): Free Stock Analysis Report
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

This article appears in: Investing , Business , Stocks

Referenced Stocks: CNMD , JNJ , SNN , SYK



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