Orthopedic devices maker,
Wright Medical Group
) reported first quarter and adjusted (excluding one-time items
other than stock-based compensation expense) earnings per share of
17 cents beating the Zacks Consensus Estimate of 9 cents.
The company reported net income of $4.6 million (or 12 cents per
share) in the reported quarter compared with $3.6 million (or 9
cents per share) in the year-ago quarter. Net income includes after
tax impact of items such as the deferred prosecution agreement as
well as restructuring of the cost base of the
Net sales for the quarter were $126.7 million, down 6% year over
year in reported terms (down 6% on a constant currency basis),
beating the Zacks Consensus Estimate of $125 million.
Revenues from the domestic market totaled $70.1 million (55.3%
of total sales), down 10.1% year over year. Domestic sales were
negatively impacted by earlier announced distributor
transformation, which occurred in the third quarter of 2011 and
issues connected with the enhancement of Wright Medical's
compliance systems. International revenues declined 1.5% to $56.6
million (44.7% of sales).
The company restated its segments to broadly comprise
Extremities and OrthoRecon segments. OrthoRecon comprises
Hips, Knees and Other. Extremities segment is composed of Foot and
Ankle, Upper Extremity, Biologics and Other sub segments.
OrthoRecon formed 58% of sales in the reported quarter with Hips
contributing 33%, Knees 25% and Other 1%. Extremities constituted
42% of revenues with Foot and Ankle contributing 23%, Upper
Extremity 5%, Biologics 12% and Other only 1%.
OrthoRecon sales dropped 8% year over year in constant currency
in the first quarter. Among its components, Hips fell 10% while
Knees and Other dropped 5% each.
Sales of Extremities segment declined 4% year over year in
constant currency in the first quarter. Among its constituents,
Foot and Ankle rose 11%, Upper Extremity was down 13% while
Biologics and Other moved down 21% and 14%, respectively.
Adjusted operating income was $15.8 million in the reported
quarter, approximately down 6.5% year over year. Adjusted operating
margin was 12.5%, flat on a year over year basis.
Cash, cash equivalents and marketable securities totaled $187.5
million, up 12.1% on a sequential basis. Long-term obligations
stood at $164.7 million, as of March 31, 2012, up 1.3%
Wright Medical continues to forecast net sales in a band of $472
million to $489 million for fiscal 2012. The company expects
adjusted earnings per share, for fiscal 2012, in the range of 26
cents to 36 cents per share.
Adjusted earnings for fiscal 2012 exclude expenses associated
with restructuring of costs, transition costs with regard to
converting a substantial portion of foot and ankle areas to direct,
potential acquisitions, costs emanating from the deferred
prosecution agreement, stock-based compensation and certain other
Wright Medical forecasts non-cash, stock-based compensation
charge of about 18 cents per share for fiscal 2012. Consequently,
adjusted earnings per share, including stock-based compensation, is
estimated in a band of 8 cents and 18 cents.
Our views on the company are moderated by intense competition
from larger players and pricing pressure. Wright Medical
competes with much bigger names such as
Smith & Nephew
). We are currently Neutral on the stock, backed by a short-term
Zacks #2 Rank (Buy).
SMITH & NEPHEW (SNN): Free Stock Analysis
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WRIGHT MEDICAL (WMGI): Free Stock Analysis
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