Back to Main

Bard Tops in 4Q, Charges Crimp Net - Analyst Blog

By: Zacks.com
Posted: 2/1/2012 10:00:00 AM
Referenced Stocks: ANGO;BCR;BSX;JNJ

Leading medical devices maker C. R. Bard 's ( BCR ) adjusted earnings for fourth-quarter fiscal 2011 topped expectation but lofty charges dragged down its profits for the quarter.

The New Jersey-based company posted adjusted earnings of $1.70 a share which beat the  Zacks Consensus Estimate of $1.68 and surpassed the year-ago earnings of $1.54. per share The results also exceeded the company's guidance by a couple of cents.

Adjusted earnings exclude one-time items including costs (of $51 million) associated with a legal settlement in the company's brachytherapy business, acquisition charges (of $7.9 million) and $4.5 million of impairments on Greek bonds. Profit (as reported) for the quarter tumbled 16% year over year to $113.8 million (or $1.30 a share), hurt by these charges.

For fiscal 2011, the company's adjusted earnings per share of $6.40 topped the Zacks Consensus Estimate by two cents and exceeded the year-ago earnings of $5.60 per share. Profit tanked roughly 36% year over year to $328 million.

Revenues

Revenues for the quarter rose 5% year over year to $751.9 million, ahead of the Zacks Consensus Estimate of $748 million. Sales were well paced by growth across the board with the company's Vascular and Oncology businesses leading from the front.

Geographically, U.S. sales inched up 2% to $502.5 million in the fourth quarter. The company continues to face procedure volume headwind in the domestic market. International revenues climbed 10% (up 9% in constant currency) to $249.4 million, strongly backed by the emerging markets, which have registered a 38% growth in the quarter.

For the fiscal, sales jumped 6% year over year to $2,896.4 million, edging past the Zacks Consensus Estimate of $2,893 million.

The Quarter in Detail

The company's core Vascular division posted strongest growth in the fourth quarter with sales surging 8% year over year (up 7% in constant currency) to $220.7 million, benefiting from strong growth in overseas markets. However, the vascular business remains challenged by pricing pressure and increased competition.

Within Vascular, endovascular sales climbed 12% in the quarter driven by higher sales of biopsy products (up 9%) and SenoRx acquisition. Peripheral PTA sales jumped 13% with healthy growth (of over 50%) witnessed in the chronic total occlusion ("CTO") product line.

Electrophysiology ("EP") revenues clipped 5% due to lower sales from EP disposables. EP Lab system sales spiked 10% whereas surgical graft revenues fell 7%. Revenues from stent business rose 9% with LifeStent posting a 17% growth. Vena cava filter sales dipped 3% in the quarter.

Revenues from the Oncology segment climbed 6% to $201.4 million. Peripherally inserted central catheters/PICC sales rose 7% while Port revenues edged up 3%. Sustained strong performance in the emerging markets boosted PICC sales. Revenues from vascular access ultrasound products climbed 18% while the dialysis catheter business rose 7% in the quarter.

The Urology division continues its low single-digit growth streak with sales moving up 3% to $190.4 million. Revenues from continence products slipped 16% mostly due to the discontinuation of the Contigen product line.

Basic drainage sales edged up 3% with Japan contributing to the growth. Revenues from I.C. Foley catheter crept up 2%. Urological specialties revenues fell 2% with brachytherapy sales growing 1%. Sales from StatLock catheter stabilization line went up 2% in the quarter.

C.R. Bard's Surgical Specialties division posted a revenue growth of 2% to $116.6 million. Soft tissue repair business rose 3% with natural tissue products sales climbing 18% in the quarter. Synthetic hernia products sales jumped 7%, strongly backed by new products. Revenues from hernia fixation business plummeted 29%, hurt by increased competition. Performance irrigation and hemostasis businesses contracted 7% and 3%, respectively, in the quarter.

Margin Analysis

Gross margin for the fourth quarter fell to 62.5% from 63.2% a year-ago as higher cost of sales more than offset the top line growth. Pricing pressure and amortization affected gross margin in the quarter.

Marketing, selling and administrative expenses as a percentage of sales were 28.5%, flat year over year. Research and development expenses (as a percentage of sales) declined to 5.8% from 7.3% a year ago. Operating margin dipped to 18.8% from 24.7% a year ago.

Financial Health

C.R. Bard exited fiscal 2011 with cash and short-term investments of $743.5 million, a 23% sequential decline due to acquisitions. Total debt increased 33% sequentially to $1.2 billion as the company raised short-term debt to fund acquisitions. C.R. Bard repurchased roughly 1.4 million shares in the fourth quarter.

Guidance and Recommendation

Moving ahead, C.R. Bard expects constant currency revenue growth of 4%-7% for first-quarter fiscal 2012. On the earnings front, the company expects adjusted earnings in the range of $1.53 to $1.57 a share. The current Zacks Consensus Estimate for the quarter is $1.56.

C.R. Bard bought medical devices makers ClearStream Technologies and Medivance Inc. last year. The company expects these deals to be accretive to its earnings in 2012. 

C.R. Bard also scooped up Minnesota-based Lutonix, Inc. for roughly $225 million in late 2011. The acquisition will enable the company to expand into the large and lucrative market for drug-coated balloons.

C.R. Bard's well-diversified end-markets and vast product portfolio insulate it from fluctuations in any single therapeutic category. We expect new product flow to drive organic revenue growth and help C.R. Bard to meet its sales objective. The company launched 51 new products last year.

However, heightened competition and pricing/volume pressure remain areas of concern. C.R. Bard faces strong competition from Boston Scientific ( BSX ), Johnson & Johnson ( JNJ ) and Angiodynamics ( ANGO ). We currently have a Neutral rating on C.R. Bard. The stock currently retains a Zacks #4 Rank, which translates into a short-term "Sell" recommendation.


 
ANGIODYNAMICS ( ANGO ): Free Stock Analysis Report
 
BARD C R INC ( BCR ): Free Stock Analysis Report
 
BOSTON SCIENTIF ( BSX ): Free Stock Analysis Report
 
JOHNSON & JOHNS ( JNJ ): Free Stock Analysis Report
 
To read this article on Zacks.com click here.
 
Zacks Investment Research