Management at Greatbatch, Inc. (GB) announced a strategic initiative to realign its business to achieve 5% organic growth. The company aims to combine its two separate reportable segments viz. Greatbatch Medical and Electrochem Solutions into a single sales & marketing and operating group.
The company has appointed 4 new senior executives following the realignment decision. It expects to incur restructuring charges in the range of $4.2 to $5.0 million, including employee severance and termination benefits.
Following its completion, the realignment plan is expected to generate annual savings of $7.0 to $7.7 million. Moreover, evaluating the short-term benefit from the realignment plan, Greatbatch has raised its adjusted earnings per share guidance range to $2.00– $2.05 from the previous range of $1.90–$2.00 per share.
With the success of its integration and consolidation efforts, Greatbatch is now shifting its focus to become a producer of complete medical devices for Original Equipment Manufacturer (OEM) customers from being a supplier of batteries, capacitors, and components used in implantable medical devices (IMDs).
Moreover, Greatbatch boasts a vast intellectual property (IP) portfolio of more than 1,000 patents. The IP along with better sales and marketing initiatives will allow the company to gain market share in the multi-billion dollar worth cardiac and neuromodulation, portable medical, vascular and orthopedics markets.
Our Take
We believe that the realignment plan will help management to emphasize on investing in its core business as well as develop innovative products by combining the resources of the integrated unit. We are also encouraged by Greatbatch’s effort to transform into a medical devices company. Almost 80% of its revenues are derived from medical devices companies. Its top customers include leading players such as Medtronic (MDT) and St. Jude Medical (STJ).
Greatbatch, Inc. currently retains a Zacks Rank #3 (Hold). A soft CRM market and pricing pressure remain headwinds for the company. While we remain on the sidelines for Greatbatch, semi-discretes company Vishay Intertechnology Inc. (VSH) with a Zacks Rank #2 (Buy) warrants a look.
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