Wright Medical Retained at Neutral - Analyst Blog


We maintain our Neutral recommendation on Wright Medical Group ( WMGI ). Its first quarter earnings beat the Zacks Consensus Estimate. The company reported a modest profit in the quarter, hit by charges.

Net sales for the quarter were $126.7 million, down 6% year over year in reported and constant currency terms, beating the Zacks Consensus Estimate.

The company restated its segments to broadly comprise Extremities and OrthoRecon. OrthoRecon comprises Hips, Knees and Other. The Extremities segment is composed of Foot and Ankle, Upper Extremity, Biologics and Other product lines.

OrthoRecon formed 58% of sales in the reported quarter with Hips contributing 33%, and Knees 25%. Extremities constituted 42% of revenues with Foot and Ankle contributing 23%, Upper Extremity 5% and Biologics 12%.  

OrthoRecon sales dropped 8% year over year in constant currency in the first quarter. Among its components, Hips fell 10% while Knees dropped 5%.

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 moved down 21%.  

Wright's focus on niche technologies lends some support amid economic cyclicality. Moving forward, revenue growth will be supported by new product launches. Moreover, new deals in extremities are expected to bolster growth in this segment. The company's restructuring initiatives should also boost future profitability.

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 Zimmer Holdings ( ZMH ), Stryker ( SYK ) and Smith & Nephew ( SNN ). Moreover, the company remains exposed to procedure volume headwind.

SMITH & NEPHEW (SNN): Free Stock Analysis Report
STRYKER CORP (SYK): Free Stock Analysis Report

WRIGHT MEDICAL (WMGI): Free Stock Analysis Report
ZIMMER HOLDINGS (ZMH): Free Stock Analysis Report
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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 The NASDAQ OMX Group, Inc.

This article appears in: Investing , Business , Stocks

Referenced Stocks: SNN , SYK , WMGI , ZMH



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