Wright Medical Group Continues to See Wider Loss - Analyst Blog

By
A A A

Wright Medical Group 's ( WMGI ) second quarter results have no exceptions as the company again posted a broader loss of $24.0 million or 48 cents per share for the quarter compared with $5.8 million or 13 cents in the same quarter of 2013. The loss was also broader than the Zacks Consensus Estimate of 45 cents.

Reported loss was $53.6 million or $1.08 per share in the quarter compared with $15.5 million or 34 cents per share in the second quarter of 2013. The wider loss can be attributable to the company's rising costs and operating expenses.

Wright Medical Group, Inc - Earnings Surprise | FindTheBest



Revenues

Revenues in the quarter went up 19.5% (both in reported and constant currency) to $72.4 million, missing the Zacks Consensus Estimate of $74 million. The revenue growth was driven by strong growth in foot and ankles product line.

On a geographic basis, international sales were strong with a 28.4% rise in revenues to $23.0 million. Revenues from domestic market grew 15.7% to $49.3 million in the quarter.

Globally, revenues from Foot and Ankle business surged 25.6% to $46.9 million while the same from the Upper Extremity and Biologics product lines went up 22.4% and 7.0% to $7.45 million and $16.2 million, respectively. However, revenues from Other businesses slid 8.0% to $1.9 million in the quarter.

Margins

Gross profit rose 13.8% to $52.4 million as the strong revenue growth more than offset the impact of a 37.4% rise in cost of sales to $20.0 million. However, gross margin decreased 360 basis points (bps) to 72.4% from 76.0% a year ago.

Adjusted operating loss nearly tripled to $22.0 million from $7.9 million in the year-ago quarter as operating expenses jumped 37.7% to $81.5 million in the 2014-second quarter. Consequently, adjusted operating (loss) margin rose significantly to 30.4% from 13.0% a year ago.

Adjusted EBITDA (loss) was $11.6 million in the quarter in sharp contrast to EBITDA of $590 thousand in the second quarter of 2013. Adjusted EBITDA (loss) margin was 16.0% compared with EBITDA margin of 1.0% in the 2013-quarter.

Financial Position

WMGI had cash and cash equivalents and marketable securities of $315.1 million as of Jun 30, 2014, up from $175.4 million as of Dec 31, 2013. The increase was driven by the closures of the MicroPort, Solana Surgical and OrthoPro transactions. Long-term obligations rose to $280.3 million from $275.4 million as of Dec 31, 2013.

In the first six months of the year, cash flow from operations deteriorated significantly to the use of $51.6 million from an inflow of $5.8 million a year ago. Capital expenditures more than doubled to $24.3 million from $9.7 million in the year-ago period. Consequently, free cash flow significantly increased to $75.9 million from $4.0 million in the first half of 2013.

Guidance Reiterated

For 2014, WMGI reiterated its revenues guidance of $308-$312 million, reflecting a year-over-year rise of 27-29%. The current Zacks Consensus Estimate of $310 million lies within the projected range.

The expected range of revenues incorporates the effect of short-term dis-synergies due to the closure of transactions with MicroPort, Biotech International, Solana Surgical and OrthoPro.

WMGI also reiterated its previously announced adjusted EBITDA (loss) guidance in the range of $20.0 to $15.0 million for 2014. However, the company still expects to exit the year with positive adjusted EBITDA.

For 2014, WMGI anticipates adjusted loss per share, including stock-based compensation, in the range of $1.28-$1.38. The current Zacks Consensus Estimate of a loss of $1.32 lies within the guided range.

Our Take

Arlington, TN-based WMGI is a global orthopedic device company specializing in the design, manufacture and marketing of reconstructive joint devices and bio-orthopaedic materials.

Despite being a loss-making company, we rely on the company's turnaround outlook for the full year. We are also optimistic about the company's foot and ankle business, which is a consistently stellar performer.

Currently, WMGI retains a Zacks Rank #2 (Buy). Other medical product stocks that are also worth a look include Symmetry Medical, Inc. ( SMA ), Alere Inc. ( ALR ), and Medtronic, Inc. ( MDT ). Symmetry Medical sports a Zacks Rank #1 (Strong Buy), while both Alere and Medtronic carry the same Zacks Rank as WMGI.


Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

WRIGHT MEDICAL (WMGI): Free Stock Analysis Report

MEDTRONIC (MDT): Free Stock Analysis Report

SYMMETRY MEDICL (SMA): Free Stock Analysis Report

ALERE INC (ALR): Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research



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: WMGI , MDT , SMA , ALR

Zacks.com

Zacks.com

More from Zacks.com:

Related Videos

Stuck
Stuck                               
Yoga Surfer
Yoga Surfer                         

Stocks

Referenced

Most Active by Volume

65,165,829
  • $17.105 ▲ 0.44%
50,383,880
  • $38.90 ▲ 0.65%
47,338,029
  • $102.47 ▲ 1.40%
42,834,166
  • $3.545 ▲ 0.71%
38,937,923
  • $5.335 ▲ 4.40%
30,059,822
  • $87.47 ▼ 2.69%
25,040,390
  • $15.895 ▼ 1.33%
24,871,556
  • $77.76 ▲ 1.25%
As of 9/23/2014, 02:53 PM

Find a Credit Card

Select a credit card product by:
Select an offer:
Search
Data Provided by BankRate.com