Symmetry Medical Q3 Earnings & Revenues Miss, Rise Y/Y - Analyst Blog

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Symmetry Medical Inc. ( SMA ) reported adjusted earnings per share of 11 cents in the third quarter of fiscal 2014, which missed the Zacks Consensus Estimates of 14 cents. However, earnings per share (EPS) improved from 8 cents reported in the year-ago quarter.

Symmetry Medical Inc - Earnings Surprise | FindTheBest

Quarter Details

Revenues remained almost flat from the year-ago quarter to $96 million, which lagged the Zack Consensus Estimate of $97 million.

The OEM Solutions segment's revenues totaled $76 million, up 3.3% from the year-ago quarter. Higher revenues from the Instruments (up 4.4%), Implants (up 3.9%) and Other (up 29.1%) segments drove the growth, which was partially marred by a drop in Cases segment revenues (down 4.1%). OEM customers spent relatively less on Instruments and Cases in the quarter.

The Symmetry Surgical segment revenues grossed $20.0 million, down 9.8% from the year-ago quarter. The decline can be mainly attributed to lower amount of spending in hospitals. Revenue growth was also negatively impacted by loss of distribution rights of the New Wave surgical product line, which was acquired by Covidien (COV).

Symmetry Medical's largest customer accounted for 29.5% of third-quarter revenues.

Gross margin expanded 40 basis points on a year-over-year basis to 26.8%. The gross margin expansion was primarily driven by cost efficiency initiatives.

Sales and marketing expenses was $6.3 million, down 3.1% from the year-ago quarter. However, general and administrative expenses increased 26.8% year over year to $14.9 million.

Adjusted operating margin contracted 130 basis points on a year-over-year basis to 8.5%, due to higher costs and a lower revenue base.

Financial Position

Cash and cash equivalents at the end of third quarter was $27.2 million.

Our Take

We believe that sluggish hospital spending environment will remain a headwind for top-line growth, going forward. Nevertheless, the divestiture of the OEM business is positive for the company, as it will help management to focus on it relatively fast growing surgical business.

Zacks Rank

Currently, Symmetry Medical carries a Zacks Rank #3 (Hold). Better-ranked medical instrument stocks include AngioDynamics Inc. ( ANGO ), Fluidigm Corporation ( FLDM ) and Cynosure, Inc. ( CYNO ). While AngioDynamics sports a Zacks Rank #1 (Strong Buy), both Fluidigm Corporation and Cynosure 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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