Here's Why You Should Retain CONMED (CNMD) Stock for Now

CONMED Corporation CNMD is well poised for growth in the coming quarters, courtesy of its broad product spectrum. The optimism, led by the solid fourth-quarter 2023 performance and a potential General Surgery, is expected to contribute further. However, headwinds from supply-chain constraints and data security threats persist.

This currently Zacks Rank #3 (Hold) company’s shares have lost 15.2% in the past year against the industry’s 3.2% growth. The S&P 500 Index has increased 24.8% in the same time frame.

CONMED, the renowned global medical products manufacturer specializing in surgical instruments and devices, has a market capitalization of $2.46 billion. The company projects 25.4% growth over the next five years and expects to maintain its strong performance going forward.

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Image Source: Zacks Investment Research

Its earnings surpassed estimates in three of the trailing four quarters and missed the same once, delivering an average surprise of 4.75%.

Let’s delve deeper.

Potential in General Surgery: The segment consists of a complete line of endo-mechanical instrumentation for minimally invasive laparoscopic and gastrointestinal procedures, a line of cardiac monitoring products, as well as electrosurgical generators and related instruments.

CONMED’s unique products and solutions within the General Surgery segment have been providing a competitive edge in the MedTech space. One of these products, the Anchor Tissue Retrieval bag, deserves a special mention. It is one of the major platforms in the company’s specimen bag portfolio.

Broad Product Spectrum: CONMED offers a broad line of surgical products, including several new devices in the Orthopedic, Laparoscopic, Robotic, Open Surgery, Gastroenterology, Pulmonary and Cardiology sections.

Products like the Hi-Fi Tape and Hi-Fi suture interface are critical components of repair security in the rotator cuff repair space. During the fourth quarter, CNMD remained focused on the introduction of a delivery system for MIS rotator cuff repair.

Other notable offerings were the MicroFree platform in Orthopedics, the TruShot, the Y-Knot Pro and the CRYSTALVIEW Pump. The Anchor Tissue Retrieval bag is a unique product under the General Surgery arm.

Solid Recurring Revenue Base: Approximately 80% of CONMED’s revenues are recurring, derived from the sale of disposable single-use products. The remaining 20% comes from the sale of capital equipment (such as powered drills and saws for surgery, electrosurgical generators, video-imaging cameras, fluid control systems and surgical hand-pieces). This, in turn, creates demand for complementary single-use items.

Hospitals and clinics are expanding the use of single-use, disposable products. This endeavor is aimed at reducing expenses related to sterilizing surgical instruments and products following surgery.

CONMED’s revenues totaled $327 million in the fourth quarter of 2023, up 30.4% year over year. Additional sales from newly acquired businesses contributed approximately 40 basis points of growth.

Downsides

Regulatory Requirements: Substantially, all CONMED products are classified as class II medical devices, subject to regulations from numerous agencies and legislative bodies worldwide. As a manufacturer of medical devices, the company’s manufacturing processes and facilities are subject to on-site inspection and constant review by the FDA for compliance with the Quality System Regulations.

Supply Constraints: Although CONMED recorded strong growth across all segments in the fourth quarter, the legacy orthopedic business was hurt by supply-chain constraints. The supply disruption continued to pose a headwind for the company during the fourth quarter of 2023.

CNMD expects supply-chain issues to improve from the first quarter of 2024. Moreover, revenues were hurt by unfavorable currency movement during the fourth quarter.

Estimate Trend

CONMED is witnessing a negative estimate revision trend for 2024. In the past 30 days, the Zacks Consensus Estimate for earnings declined from $4.38 per share to $4.35.

The same for the company’s first-quarter revenues is pegged at $305.6 million, indicating a 3.4% improvement from the year-ago quarter’s reported number. The bottom-line estimate for the first quarter is expected to improve 16.7% from the year-ago period’s level of 77 cents.

CONMED Corporation Price

CONMED Corporation Price

CONMED Corporation price | CONMED Corporation Quote

Stocks to Consider

Some better-ranked stocks in the broader medical space are DaVita Inc. DVA, Cardinal Health, Inc. CAH and Cencora COR .

DaVita, carrying a Zacks Rank #1 (Strong Buy) at present, has an estimated long-term growth rate of 12.1%. Its earnings surpassed estimates in each of the trailing four quarters, delivering an average surprise of 35.6%. You can see the complete list of today’s Zacks #1 Rank stocks here.

DaVita’s shares have risen 47.1% compared with the industry’s 11.6% growth in the past year.

Cardinal Health, carrying a Zacks Rank of 1 at present, has an estimated long-term growth rate of 15.9%. Its earnings surpassed estimates in each of the trailing four quarters, delivering an average surprise of 15.6%.

CAH’s shares have risen 33.6% compared with the industry’s 11.3% growth in the past year.

Cencora, carrying a Zacks Rank of 2 (Buy) at present, has an estimated long-term growth rate of 9.8%. Its earnings surpassed estimates in each of the trailing four quarters, delivering an average surprise of 6.7%.

Cencora’s shares have rallied 51.5% in the past year compared with the industry’s 3.6% growth.

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CONMED Corporation (CNMD) : 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.

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