) second-quarter 2013 adjusted earnings per share (EPS) of 8
cents beat the Zacks Consensus Estimate of 5 cents. However, it
was flat year over year.
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SYMMETRY MEDICL (SMA): Free Stock Analysis
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In the quarter under review, the company reported net income of
$1.2 million (or 3 cents a share), down 25.0% from $1.6 million
(or 5 cents) in the year-ago quarter.
Revenues were roughly flat year over year at $101.9 million in
the second quarter on account of double-digit decline in Symmetry
Surgical sales, offset by decent gains in the Original Equipment
Manufacturer ("OEM") Solutions business. Revenues were higher
than the Zacks Consensus Estimate of $99 million.
Revenues from the core OEM Solutions segment grew 6.1% to $79.6
million, led by higher sales of Implants and Cases, partially
offset by sales decline in Instruments and Other (Aerospace)
category. Foreign currency exchange rates lowered total revenues
in the OEM segment by 0.2%.
Among the sub-categories, Instruments revenues dipped 1% year
over year to $28.1 million. The Implants business posted a rise
of 12.3% in revenues to $28.1 million, driven by stable procedure
volumes and a benefit from the timing of stocking orders and
inventory adjustments by certain customers.
Cases revenues surged 17.8% in the quarter to $17.1 million on
the back of new products. Other revenues were $6.3 million, down
9.1% as compared to $6.9 million in the year-ago quarter.
Revenues from the smaller Symmetry Surgical unit declined for the
second time due to sales disruptions associated with integration
of Codman surgical instruments business into Symmetry Surgical.
Revenues dropped 18.2% to $22.3 million in the quarter, however,
it was up 0.6% on a sequential basis.
Gross margin inched down 10 basis points (bps) to 26.1% in the
second quarter, from 26.2% a year ago, due to lower percentage of
revenue contribution from higher margin Symmetry Surgical
segment. It was further dampened by margin improvement in the OEM
Solutions franchise. Increased margin in the OEM Solutions
business was driven by higher volumes and efficiencies resulting
from the Symmetry business system.
Selling, marketing, general and administrative (SG&A) charges
increased 2.3% to $17.9 million. Research and Development
(R&D) expenses climbed 44.8% to $1.2 million in the reported
quarter. Operating margin declined 130 bps to 6.6% from 7.9% a
SMA exited the second quarter of 2013 with cash and cash
equivalents of $12.5 million compared with $9.8 million at the
end of 2012. Long-term debt decreased to $202.0 million versus
$211.2 million at the end of 2012. The company generated solid
operating cash flow of $8.3 million and used $2.8 million for
capital expenditures in the quarter.
Management reiterated its 2013 revenue guidance, provided in
June. The company expects sales in a band of $400-$415 million
for the full year. The Zacks Consensus Estimate for 2013 revenues
of $409 million lies within the guided range.
However, earnings per share (on a reported basis) target has been
raised to a range of 14 cents-24 cents from the earlier range of
11 cents-21 cents for 2013 while adjusted earnings are expected
to be in the range of 40 cents to 50 cents for the year. This
includes a negative impact of the Medical Devices excise tax of 2
The adjusted earnings forecast excludes one-time items such as
facility closure/severance, debt issuance costs, acquisition and
amortization-related charges, which are expected to dilute 2013
earnings by roughly 26 cents a share (earlier 29 cents). The
Zacks Consensus Estimate for 2013 earnings of 40 cents was pegged
at the bottom end of the guided range.
We are encouraged by SMA's second quarter results which beat the
Zacks Consensus Estimate on both fronts. However, the sudden turn
of events in the high-margin Surgical business from the start of
2013 is a cause of concern and the company needs to resolve
integration related issues of its latest acquisitions to avoid
wastage of resources. Despite this, we are optimistic about
Symmetry's larger OEM Solutions business, which is growing at a
Symmetry carries a Zacks Rank #3 (Hold). While we remain on the
sidelines regarding SMA, companies such as
) warrants a look. Hanger carries a Zacks Rank #1 (Strong Buy),
while the other two stocks carry Zacks Rank #2 (Buy).