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Greatbatch Unveils 2015 Preliminary Results & 2016 Outlook


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Greatbatch, Inc. GB recently announced preliminary results for 2015 and unveiled the outlook for 2016. The manufacturer of medical devices estimates sales of around $1.44 billion in 2015, reflecting a decline of 8% on a year-over-year basis. Notably, the sales figure in 2015 and 2014 incorporates the Lake Region merger (completed in Oct 27, 2015) and Nuvectra spin-off (expected in 2016).

Per management, adjusted EBITDA in 2015 is expected to be $312 million, reflecting a year-over-year increase of 1.6%. Adjusted EBITDA margin, on the other hand, is estimated to expand 70 basis points (bps) to 21.6%.

For 2016, Greatbatch expects sales to be about $1.47 billion. Adjusted EBITDA is likely to be around $327 million while adjusted EBITDA margin is projected at 22.3%. In 2016, management will focus on expanding margins and also on generating significant organic growth.

We are not overtly impressed with the preliminary results, given that the top line is expected to take a hit. However, the expected EBITDA margin expansion is a positive.

Moreover, the recent Lake Region buyout has important long-term prospects for the company. The acquisition is also anticipated to provide significant operating synergies, which will, in turn, boost earnings. In fact, management at Greatbatch expects the acquisition to help adjusted earnings per share achieve double-digit growth rate in 2016. Post that, it is expected to be even more accretive.

Additionally, net annual synergy for operating profit is projected at around $25 million in 2016 and is likely to increase to at least $60 million by 2018. The combined company is also poised to generate significant cash flow, which will strengthen the balance sheet.

Again, the proposed spin-off of its neuromodulation device business (QiG Group) is expected to help Greatbatch operate more effectively by proper allocation of resources.  Post spin-off, the new entity is going to be known as Nuvectra Corp, which will primarily emphasize on the development & marketization of the Algovita spinal cord stimulation system.

Zacks Rank & Other Stocks to Consider

Currently, Greatbatch sports a Zacks Rank #1 (Strong Buy).

Other well-placed stocks in the medical space are Exactech EXAC , DexCom DXCM and Fresenius Medical Care FMS . While Exactech sports a Zacks Rank #1, both DexCom and Fresenius Medical Care have a Zacks Rank #2 (Buy).

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FRESENIUS MED (FMS): Free Stock Analysis Report

EXACTECH INC (EXAC): Free Stock Analysis Report

DEXCOM INC (DXCM): Free Stock Analysis Report

GREATBATCH INC (GB): 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 Nasdaq, Inc.



This article appears in: Business , Investing , Stocks
Referenced Symbols: FMS , DXCM ,



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