Mindray Medical Misses Q1 Earnings, Outlook Disappoints - Analyst Blog

Medical devices maker Mindray Medical International Ltd. MR reported adjusted earnings of 31 cents in the first quarter 2015, which missed the Zacks Consensus Estimate by 7 cents. Adjusted earnings per share (EPS) decreased 8.8% on a year-over-year basis, primarily owing to lower gross and operating margins.

Quarter Details

Net revenue increased a modest 2.9% year over year to $272.5 million. China revenues (representing 44.8% of net revenue) grew 5.3% from the year-ago quarter to almost $122 million, while international revenues were up 1.1% to $150.5 million. Asia Pacific net revenues surged 25% on a year-over-year basis.

In-Vitro Diagnostic Products (IVD) revenues went up 3% to $75.1 million, driven by robust reagents sales which accounted for 48.3% of the segment's net revenue. Reagent net revenues increased more than 30% on a year-over-year basis.

Patient Monitoring & Life Support Products Systems revenues increased 4.9% year over year to $102.8 million. Meanwhile, Medical Imaging revenues declined 1.3% from the year-ago quarter to $66.7 million.

Mindray Medical launched three products in the quarter, including a high-end tablet color ultrasound, and two low-end hematology analyzers.

Other revenues (including sales from the orthopedics business, service revenues from extended warranties, sales of accessories and repair service revenues for post-warranty period) increased 6% to $27.8 million.

Adjusted gross margin contracted 60 basis points (bps) from the year-ago quarter to 55.3%. EBITDA decreased 1% year over year to $45.5 million.

Adjusted general and administrative (G&A) expenses, as a percentage of revenues, decreased 180 bps on a year-over-year basis to 9.5%. Meanwhile, adjusted research and development (R&D) expenses, as a percentage of revenues, increased 130 bps to 12.7%.

Adjusted operating margin contracted 10 bps to 131%, primarily because of higher operating expenses.

Financial Position

As of Mar 31, 2015, cash and cash equivalents (including restricted cash, restricted investments and short-term investments) were $1.12 billion, slightly better than $1.10 billion as Dec 31, 2014.

Net cash provided by operating activities was approximately $37 million, much lower than $140.7 million reported in the fourth quarter of 2014, but higher than $19.7 million reported in the year-ago quarter.


Mindray Medical estimates net revenue for 2015 to grow in mid-single digits percentage over 2014 figures. The company now expects 2015 adjusted net income decline in high-teens percentage (higher than previous guidance of high-single digits), primarily due to the higher expenses related to the recently announced employee incentive and talent retention program.

Mindray Medical estimates capital expenditure for 2015 at around $150 million.

Our Take

Mindray Medical's first-quarter 2015 results failed to impress. Although new product launches and a robust pipeline are major positives, intensifying competition and pricing woes will keep margins under pressure for the time being. We also believe that foreign exchange volatility will remain a significant headwind in the near term.

Stocks to Consider

Mindray Medical currently has a Zacks Rank #3 (Hold). Better-ranked stocks in the medical sector include Inogen INGN , Masimo MASI and Natus Medical BABY . All the three stocks carry a Zacks Rank #2 (Buy).

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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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