Kinetic Concepts' (KCI) first quarter fiscal 2011 adjusted EPS was $1.11, beating the year-ago quarter's $0.91. Active Healing Solutions revenues increased banking on higher unit volumes in the US, resulting from increased usage of traditional VAC therapy products and new negative pressure-based therapies. The LifeCell business increased penetration into EMEA markets.
Though the company had been witnessing declining TSS revenue, the situation has improved a lot, which is reflected in the sequential improvement in this segment. Kinetic is targeting new geographies as well as opting for meaningful diversification of its products.
We expect further expansion of Kinetic's business in the upcoming quarters and accordingly upgrade the stock to Outperform. Our target price of $71 per share is based on 14.1x our 2011 EPS estimate of $5.03.
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