Symmetry Medical (SMA) posted first-quarter fiscal 2011 adjusted earnings per share of 9 cents, just missing the Zacks Consensus Estimate of 10 cents while surpassing the year-ago earnings of 6 cents a share.
Adjusted earnings exclude facility consolidation expenses, employee severance payments and management transition costs. Net income (as reported) slid 13% year over year to $1.4 million (or 4 cents a share) on account of these charges.
Revenues
Revenues leapt 13.4% year over year to $95.8 million, exceeding the Zacks Consensus Estimate of $91 million. Sales were boosted by higher customer shipments across the Indiana-based company’s instruments and surgical cases businesses.
By product category, sales from surgical instruments soared 24% year over year to $39.2 million. Revenues from implants, however, dipped 4% to $27.2 million. Cases sales climbed 23% to $23.2 million while other revenues rose 5% to $6.2 million.
Margins
Gross margin remained flat year over year at 20.2% as higher sales were offset by costs related to customer service and sustained investment in quality and regulatory services. Operating margin fell to 3.3% from 4.6% a year ago, impacted by the facility consolidation and management transition charges and severance payments.
Balance Sheet
Symmetry ended the quarter with cash and cash equivalents of roughly $17.6 million, up 68% year over year. Total long-term debt declined 4% year over year to $85.4 million.
Outlook Backed
Symmetry has reaffirmed its guidance for fiscal 2011. The company still expects revenues in the range of $363 million to $383 million and adjusted earnings in the band of 57 cents to 65 cents a share.
On a reported basis, earnings forecast remains in the range of 50 cents to 58 cents per share. The current Zacks Consensus Estimates for revenues and earnings per share for 2011 are $376 million and 60 cents, respectively.
Symmetry is the largest OEM provider of implants and related surgical instruments and cases to orthopedic devices manufacturers. Its major customers include Johnson & Johnson’s (JNJ) DePuy, Stryker (SYK) and Zimmer Holdings (ZMH).
Symmetry has adopted a three-pronged strategy to tackle the economic downturn by preserving cash, developing an extensive supply chain and focusing on bottom line improvement. The company has created a distinct competitive niche in the orthopedic devices market with its “Total Solutions Approach.”
Symmetry should benefit from higher demand for its solutions as its major customers ramp up spending and accelerate product launches. However, the company’s high spending may continue to weigh on its bottom line in the upcoming quarters. Currently, we have a Neutral recommendation on the stock.
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