Mindray Earnings Meet Ests, Guidance Down - Analyst Blog

Chinese medical devices maker, Mindray Medical International Limited ( MR ) posted a 15.4% rise in adjusted earnings per share to 45 cents for the 2013 third-quarter from 39 cents a year ago and met the Zacks Consensus Estimate.

Adjusted net earnings rose 15.8% year over year to $54.5 million from $47.0 million in the third quarter of 2012. However, reported earnings decreased to $30.1 million or 25 cents per share from $35.8 million or 30 cents per share in the 2012-third quarter.

Net revenues grew 15.3% to $296.3 million, lying below the Zacks Consensus Estimate of $331.0 million. Unlike the second quarter of the year, international sales were much stronger than that in Mindray's domestic market.

International revenues grew 17.9% to $164.3 million while revenues from China grew at a slower pace of 12.1% to $132.0 million due to delays in purchasing activities in the quarter under review. Revenues grew impressively by 25% in Western Europe while some countries in the emerging markets continued to perform well.

Segment Revenues

Revenues from Patient Monitoring & Life Support Products rose 6.2% to $110.3 million from $103.8 million in the prior-year quarter, contributing 37.2% to overall net revenues.

Revenues from In-Vitro Diagnostic Products went up 14.2% to $83.0 million from $72.6 million in the prior-year quarter, contributing 28.0% to net revenues. Reagents sales accounted for 40.2% of this segment's net revenues.

Revenues from Medical Imaging Systems escalated 26.7% to $77.1 million from $60.9 million in the 2012-quarter, contributing 26.0% to net revenues.

Revenues from Others (including sales from the orthopedics business, service revenues from extended warranties, sales of accessories and repair service revenues for post-warranty period) zoomed 31.2% to $25.9 million from $19.8 million a year ago, contributing 8.8% to overall net revenues.


Adjusted gross profit rose 15.3% to $167.0 million but gross margin was flat at 56.4% in the quarter. Adjusted operating profit went up 8.1% to $54.5 million but operating margin dipped 120 basis points to 18.4% from 19.6% a year ago.

Financial Position

MR had $200.0 million in cash and cash equivalents as of Sep 30, 2013, down 19.3% from $247.9 million as of Dec 31, 2012. Total bank loans more than doubled to $314.9 million from $135.1 million as of Dec 31, 2012.

In the first nine months of 2013, cash flow from operating activities inched up 2.7% to $185.7 million from $180.8 million in the same period of 2012, due to higher net earnings. Capital expenditure surged 42.2% to $67.2 million compared with $47.2 million a year ago.

Lower Guidance

Mindray toned down its revenue forecast for the year due to sluggish hospital purchase trend in China. The company expects at least 13% rise in revenues over 2012 compared with the prior forecast of at least 18% for the year. MR also reduced its capital expenditures guidance to $100 million from $130 million for the year.

Our Take

Mindray is a bellwether in the Chinese MedTech industry with a solid international presence. A key distinction with domestic competitors is that the majority of Mindray's products have CE Mark and/or Food and Drug Administration (FDA) clearance. MR maintains a decent product pipeline and brings out several new products each year. New products contribute in a major way to the company's revenues. However, sluggish market in China is a matter of concern for the company's earnings.

Currently, MR carries a Zacks Rank #2 (Buy). Other stocks that are also performing well in the medical instruments industry include Cynosure, Inc. ( CYNO ), CryoLife, Inc. ( CRY ) and Natus Medical Inc. ( BABY ). All of them carry a Zacks Rank #1 (Strong Buy).

NATUS MEDICAL (BABY): Free Stock Analysis Report

CRYOLIFE INC (CRY): Free Stock Analysis Report

CYNOSURE INC-A (CYNO): Free Stock Analysis Report

MINDRAY MEDICAL (MR): 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.

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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