Symmetry Medical, Inc. (SMA): New Analyst Report from Zacks Equity Research - Zacks Equity Research Report


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Symmetry Medical reported dismal third-quarter 2014 results with both revenues and earnings missing the Zacks Consensus Estimate. Revenue growth was negatively impacted by weak surgical revenues while improved cost efficiency positively impacted profits. We believe that the divestiture of the company's underperforming OEM solutions business is a positive as it will help management focus on its relatively fast growing and higher margin surgical business. Nevertheless, we believe that sluggish hospital spending environment will pose a headwind to top-line growth over the next several quarters. Moreover, the surgical market is significantly fragmented. Also, heightened competition will compel Symmetry Medical to spend on new product development that will hurt margins, at least in the near term. Given the headwinds, we downgrade our recommendation from Outperform to Neutral and set a price target of $9.50.


Headquartered in Warsaw, IN, Symmetry Medical, Inc. (SMA) provides surgical instruments, orthopedic implants and sterilization cases and trays. The company operates in two reportable segments: (1) Original Equipment Manufacturer (OEM) Solutions and (2) Symmetry Surgical.

Through its OEM business (79.2% of revenues at the end of the first nine months of 2014) Symmetry Medical offers instruments, implants and sterilization cases and trays to OEM customers. In Aug 2014, the company announced the sale of the OEM business to Tecomet for $450 million in cash or $7.50 per share after fees and elimination of outstanding debt.

Under the terms of the agreement, Symmetry Medical will transfer its remaining Symmetry Surgical business to its shareholders in a newly traded standalone public company. Shareholders will receive one share in the new company for every four Symmetry Medical shares held. The company expects the transaction to be completed by the end of 2014.

Surgical business segment (20.8% of revenues at the end of the first nine months of 2014), headquartered in Nashville, Tennessee, was created in 2011. The segment developed from integration of the acquired Codman surgical instruments and Olsen Medical lines with the company's already existing hospital direct business, Specialty Surgical Instrumentation (SSI).

Symmetry Surgical offers a broad range of reusable stainless steel and titanium surgical hand-held instruments and retractor systems, sterile disposable surgical products (vein strippers, SECTO dissectors, tonsil sponges and surgical marker pens), and sterilization containers. These products are typically used in the surgical specialties of spine, general/obstetrics/gynecology, microsurgery/neurosurgery, orthopedics, laparoscopy, cardiovascular, thoracic and general surgery in the hospital setting as well as surgery centers and in select physician offices.

Symmetry Medical reported revenues of $399.9 million in 2013. In the nine-month period ended Sep 27, 2014, revenues increased 1.2% year over year to $294.1 million. Notably, United States accounted for 72.7% of the revenues.

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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 Nasdaq, Inc.

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