Leading medical devices maker C.R. Bard’s (BCR) third-quarter 2011 adjusted earnings per share of $1.62 topped the Zacks Consensus Estimate of $1.60 and exceeded the year-ago earnings of $1.43. Profit (as reported) for the quarter rose 2% year over year to $130.1 million (or $1.46 a share) on higher revenues.
Third Quarter Revisited
Revenues rose 6% year over year to $719.2 million, but missed the Zacks Consensus Estimate of $724 million. Sales were boosted by growth across the board with the company’s Vascular and Oncology business leading from the front, backed by higher overseas revenues.
U.S. sales rose just 2%, impacted by sustained softness across several product lines. International revenues surged 17%, buoyed by the emerging markets.
Revenues from the core Vascular segment jumped 9%, benefiting from the contributions of the SenoRx acquisition. Oncology sales climbed 9% while Urology sales inched up 2%. Surgical Specialties division registered a growth of 3%. Separately, C.R. Bard announced the acquisition of privately-held medical devices maker Medivance Inc.
We have discussed the quarterly results at length here: Bard's 3Q Mixed, Buying Medivance
Agreement – Estimate Revisions
Estimates for C.R. Bard for fiscal 2011 have been inclined towards the positive side over the past month with 5 (out of total 21) analysts having raised their forecasts along with a couple of reverse movements.
The scenario has been reversed for the fourth quarter with 15 (out of 22) analysts having chopped their estimates over the last 30 days with just 2 making positive revisions. There were absolutely no movements for both the fourth quarter and fiscal 2011 over the past week.
Magnitude – Consensus Estimate Trend
Estimates for the fourth quarter and fiscal 2011 have been static over the past week. Over the past month, estimate for fiscal 2011 has moved up by a penny. Given the strong directional pull, estimate for the fourth quarter has gone down by a couple of cents over the past 30 days. The current Zacks Consensus Estimates for the fourth quarter and fiscal 2011 are $1.68 and $6.38, respectively.
Our View
C.R. Bard’s well-diversified end-markets and vast product portfolio insulate it from fluctuations in any single therapeutic category. The company’s resource depth and focused innovation are its major competitive advantages. C.R. Bard’s incremental R&D investment should boost its pipeline and give way to product innovation/differentiation.
C.R. Bard is also making prudent use of cash in the form of acquisitions and share repurchases. The SenoRx acquisition has expanded the company’s product portfolio beyond its existing product range meant for ultrasound imaging. C.R. Bard recently agreed to buy Louisville, Colorado-based Medivance Inc for roughly $250 million. The acquisition bodes well with the company’s business model and will boost its critical care offerings.
We expect new product flow and sales force consolidation to drive organic revenues growth and help C.R. Bard to meet its sales objective. The new Ventralex ST umbilical hernia repair product, Ventrio ST ventral hernia repair system and the Echo PS mesh positioning system should support growth moving ahead.
However, heightened competition and pricing/procedure volume pressure remain areas of concern. C.R. Bard faces a mix of competitors ranging from large manufacturers with multiple business lines like Boston Scientific (BSX) and Johnson & Johnson (JNJ) to smaller manufacturers that offer a limited selection of products like Angiodynamics (ANGO).
Moreover, a soft U.S. market may continue to weigh on the company’s results. Our long-term Neutral rating on the stock is in tandem with a short-term Zacks #3 Rank (Hold).
About Earnings Estimate Scorecard
Len Zacks, PhD in mathematics from MIT, proved over 30 years ago that earnings estimate revisions are the most powerful force impacting stock prices. He turned this ground breaking discovery into two of the most celebrating stock rating systems in use today. The Zacks Rank for stock trading in a 1 to 3 month time horizon and the Zacks Recommendation for long-term investing (6+ months). These “Earnings Estimate Scorecard” articles help analyze the important aspects of estimate revisions for each stock after their quarterly earnings announcements. Learn more about earnings estimates and our proven stock ratings at http://www.zacks.com/education/.
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