), a medical technologies and surgical devices company, reported
third quarter 2012 adjusted earnings (excluding one-time
expenses) of 43 cents per share, beating the Zacks Consensus
Estimate of 40 cents. The company also surpassed the year-ago
earnings of 33 cents a share, up 30.3%.
Adjusted earnings exclude one-time items such as facility and
administrative costs, amortization of debt discount charges along
with the Viking acquisition expenses.
Profit in the reported quarter was $9.3 million (or 32 cents per
share) compared with a profit of $8.2 million (or 29 cents per
share) in the year-ago quarter, up 13.5%. Profit was driven by
acquisitions and cost containment measures.
CONMED completed the acquisition of Massachusetts-based
healthcare company, Viking Systems Inc. in the third quarter.
Viking has developed the innovative 3D-HD Vision System which is
used during minimally invasive laparoscopic surgery. The
acquisition is expected to boostCONMED 's surgical video products
Revenues grew 5.3% (up 6% in terms of constant currency) year
over year to $181.9 million trailing the Zacks Consensus Estimate
of $183 million. On an organic basis, revenues inched up 1.2% in
the quarter. Growth was mainly backed by higher sales across
Arthroscopy, Endoscopic Technologies and Powered Surgical
Instruments businesses, while all other businesses did not make
any significant contribution to revenue growth.
In addition, single-use products sales (79.7% of total sales)
grew 7.0% (up 7.6% in terms of constant currency) but capital
offerings (20.3% of total sales) dipped 1.1% (up 0.3% in terms of
constant currency) in the quarter.
On a geographic basis, revenues from the international markets
(49.1% of total sales) were $89.3 million. Despite the company's
foreign exchange hedging policy, sales declined $2.2 million in
Revenues from the core Arthroscopy segment increased 10.4% year
over year (up 11.5% in constant currency) to $76.6 million.
Revenues from the Endoscopic Technologies division grew 10.6% to
$13.6 million. Moreover, sales from Powered Surgical Instruments
and Endosurgery increased 3.7% and 0.6% year over year to $36.1
million and $17.8 million, respectively.
However, revenues from Electrosurgery and Patient Care dropped 3%
and 0.7%, to $22.6 million and $15.2 million, respectively.
Gross margin inched up to 53.8% in the third quarter of 2012 from
52.8% in the year-ago quarter. Adjusted operating margin
increased 50 basis points to 10.2%.
Selling and administrative charges were higher at 40.7% of sales
compared with 39.6% in the year-ago quarter. Research and
Development expenses, as a percentage of sales, were 3.9% versus
4.1% in the prior-year quarter.
CONMED exited third quarter 2012 with cash and cash equivalents
of $19.8 million, down 50.3% year over year. Long-term debt
(inclusive of current portion) decreased 3.5% year over year to
$169.4 million. Cash provided by operating activities stood at
$28 million in the quarter.
The company expects adjusted earnings to be in a range of 48
cents to 52 cents for the fourth quarter of 2012. Revenues are
projected to remain in the band of $199 million and $204 million
for the fourth quarter.
CONMED narrowed its guidance for 2012 based on the company's
financial performance in the last nine months as well as the
prevailing global economic headwinds. Revenues are forecast to
remain between $765 million and $770 million (earlier $765
million to $775 million) for 2012. Its adjusted earnings are
expected to be in the range of $1.76 to $1.80 per share (earlier
$1.75 to $1.85 per share) for 2012.
For 2013, revenues are anticipated to be between $785 million and
$795 million in 2013.CONMED expects adjusted earnings to be in
the band of $1.80 and $1.90 per share for 2013, reflecting a 5%
growth in earnings per share. Earlier, the company had planned
15% earnings growth but the upcoming Medtech tax, foreign
exchange fluctuations and the ongoing headwinds in global
healthcare utilization have dampened earnings growth.
Adjusted earnings forecast for the fourth quarter and full year
2013 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, as well as the Viking acquisition expenses. The
company is also continuing the merger of the Tampere, Finland
facility into the U.S. facilities.
The current Zacks Consensus Estimates for revenue and earnings
per share for full year 2012 are $725 million and $1.78,
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.
However, we remain concerned about poor capital product sales due
to the ongoing dismal macroeconomic conditions. Moreover,CONMED
operates in a highly-competitive orthopedic surgery market
against much larger, more technically-competent companies, such
Smith & Nephew
We currently have an Underperform recommendation onCONMED
. The company retains a short-term Zacks #4 Rank (Sell
CONMED CORP (CNMD): Free Stock Analysis
COVIDIEN PLC (COV): Free Stock Analysis
SMITH & NEPHEW (SNN): Free Stock Analysis
STRYKER CORP (SYK): Free Stock Analysis
To read this article on Zacks.com click here.