Mindray Medical International Ltd.MR posted adjusted earnings (including stock-based compensation) of 48 cents per share in the third quarter of 2015, which beat the Zacks Consensus Estimate of 31 cents and also increased 11.6% on a year-over-year basis. The upside was primarily buoyed by a modest increase in revenues coupled with an improvement in the operating margin.
Third-quarter net revenue inched up 1% on a year-over-year basis to $327.6 million. Meanwhile, China revenues (representing 46.6% of net revenue) declined 2% to $152.6 million, while international revenues increased 3.6% to $175 million.
Revenues from In-Vitro Diagnostic Products (IVD) increased 2.9% to $95.2 million, driven by robust reagents sales which accounted for 51% of the segment's net revenue.
Revenues from Patient Monitoring & Life Support Products Systems declined 2.7% year over year to $114.8 million. Medical Imaging revenues increased 3.8% from the year-ago quarter to $85.6 million.
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) increased 1% to $31.9 million in the quarter under review.
Adjusted gross margin (including stock-based compensation) contracted 180 basis points (bps) on a year-over-year basis to 55.1%, owing to higher cost of revenues.
Adjusted operating margin expanded 490 bps to 20.1%, primarily on the back of lower expenses.
Going Private
On Nov 4, 2015, Mindray Medical announced the signing of a definitive agreement to go private. Excelsior Union Limited is set to buy Mindray Medical for $28 per American Depositary Share (ADS). The merger is expected to close in the first quarter of 2016. In Jun 2015, Mindray Medical received a non-binding proposal from three of its top executives for taking the company private.
Our Take
Mindray Medical's third-quarter earnings surpassed expectations. We are certainly upbeat about the increase in operating profit, which drove the bottom line. Meanwhile, weakness in the Chinese healthcare sector continues to impact domestic revenues of the company.
Also, healthcare-related reform measures in the U.S. have hurt Mindray Medical's business by creating uncertainties and reducing demand for its products. We believe that the stiff capital spending environment, economic weakness and macro uncertainties in the developed markets will prevail as headwinds in the near term.
Zacks Rank and Key Picks
Currently, Mindray Medical carries a Zacks Rank #3 (Hold). Better-ranked stocks in the medical instruments industry are EDAP TMS SA EDAP , Natus Medical BABY and Masimo MASI . All the stocks sport a Zacks Rank #1 (Strong 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.
