On Sep 9, 2014, Zacks Investment Research downgraded Mindray Medical International Limited ( MR ) by a notch to a Zacks Rank #5 (Strong Sell).
Why the Downgrade?
On Aug 11, Mindray Medical reported disappointing 2014 second-quarter results with adjusted earnings per share showing a year-over-year decline. The company also lowered its earnings and revenue guidance for 2014 in face of the weakness in China and some key emerging markets in the first half of the year.
The lackluster results have set a negative earnings estimate revision trend for this Chinese medical devices maker. For 2014, three estimates moved down in the past 30 days, with no upward revision, sinking the Zacks Consensus Estimate by 7.7% to $1.81 per share. Meanwhile, for 2015, three estimates moved south over the last one month, causing the Zacks Consensus Estimate to contract 5.1% to $2.04.
In the second quarter, adjusted earnings per share of 53 cents went down 1.9% from the year-ago quarter but inched past the Zacks Consensus Estimate by a penny. On the other hand, revenues in the quarter showed a decent year-over-year growth of 8.9% driven by international sales, but domestic sales continued to be weak.
A sluggish Chinese healthcare sector impacted domestic revenues during the quarter. Revenues from certain key emerging markets also continue to be affected by unfavorable foreign exchange and political issues. Furthermore, Mindray Medical posted a decline in operating earnings and margin on account of higher expenses.
Also, Mindray Medical now expects 2014 net revenues to grow at least 10% over 2013, lower than the earlier guidance of 15%. The Zacks Consensus Estimate for the same is currently pegged at $1,347 million.
The company now apprehends 2014 adjusted net income to decrease by mid-single digits over 2013 as against the prior projection of in-line figures.
The long-term expected earnings growth for this stock is pegged much lower at 11.7% compared with industry growth of 17.9%.
Other Stocks to Consider
Some better-ranked medical instrument stocks include Alphatec Holdings, Inc. ( ATEC ), ERBA Diagnostics, Inc. ( ERB ) and RTI Surgical Inc. ( RTIX ). All these stocks sport a Zacks Rank #1 (Strong Buy).
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