CONMED Corporation (CNMD) posted adjusted earnings per share of 44 cents for the third quarter of 2014, up 10% from 40 cents recorded in the same quarter of 2013. Earnings per share improved on the back of higher gross margin and lower selling, general and administrative costs. Meanwhile, adjusted net earnings improved 9.7% to $12.2 million from $11.1 million in the same quarter of 2013.
Revenue Details
Revenues in the quarter dipped 2.4% (2.6% on a constant currency basis) to $175.0 million. Geographically, domestic revenues came in at $87.0 million, accounting for 49.7% of total revenues. International revenues in the quarter totaled $88.0 million, accounting for 50.3% of total revenues.
Both domestic and international revenues declined 2.4% compared to the third quarter of 2013 on a reported basis. The decline in the U.S. was caused by reduced orthopedic and visualization device revenues. Outside the U.S., the revenue fall was primarily led by reduced export sales to Latin American distributors, partially offset by higher sales in the European subsidiaries.
In terms of product category, CONMED generated revenues of $142.2 million and $32.6 million from single-use and capital products, respectively. Both single-use and capital products revenues reflected a decline of 2.4% from the prior-year quarter.
Revenues from the Orthopedic Surgery business declined 2.9% (or 3.2% in constant currency) to $92.8 million. Meanwhile, revenues from General Surgery were down 0.3% both in reported and constant currency to $69.7 million. Revenues from Surgical Visualization slipped 9.4%, both in reported and constant currency to $12.5 million.
Expenses and Margins
Gross profit increased 1.0% to $96.4 million in the reported quarter. However, adjusted gross margin expanded 80 basis points (bps) to 55.9% from 55.1% in the year-ago quarter.
Selling and administrative expenses fell 3.0% to $71.2 million while research and development expenses decreased 2.8% to $6.9 million.
Adjusted operating earnings increased 10.2% to $18.4 million and adjusted operating margin expanded 120 basis bps to 10.5% from 9.3% in the third quarter of 2013. Also, adjusted EBITDA improved 6.0% to $30.0 million in the quarter while adjusted EBITDA margin rose 130 bps to 17.1% from 15.8% in the same quarter a year ago.
Financial Position
CONMED exited the quarter with cash and cash equivalents of $64.6 million as of Sep 30, 2014, up 18.7% from $54.4 million as of Dec 31, 2013. Long-term debt (inclusive of current portion) increased 15.0% to $248.0 million from $215.6 million as of Dec 31, 2013. Consequently, the long-term-debt-to-capitalization ratio rose 330 bps to 29.5% from 26.2% as of Dec 31, 2013.
Guidance
CONMED reiterated its adjusted earnings and revenue guidance for full-year 2014. Adjusted earnings per share are expected in the range of $1.85–$1.95, representing an increase of 2.2–7.7% over 2013. The Zacks Consensus Estimate of $1.87 lies within the guided range.
Annual revenue projection is maintained in the range of $735 to $745 million. The Zacks Consensus Estimate of $740 million lies within the guided range.
Currently, CONMED carries a Zacks Rank #3 (Hold). Better-ranked stocks in the medical/dental supplies industry include The Cooper Companies Inc. (COO), Steris Corp. (STE) and Nobel Biocare Holding AG (NBHGF). All these stocks sport a Zacks Rank #1 (Strong Buy).
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