Chinese medical devices maker Mindray Medical International Ltd. (MR) posted adjusted earnings of 43 cents per share in third quarter 2014, in line with the Zacks Consensus Estimate. Earnings, however, fell 4.4% on a year-over-year basis.
Quarter Details
Third-quarter net revenue came in at $324.6 million, up 9.6% on a year-over-year basis. Meanwhile, China revenues grew 18% year over year to $155.7 million, representing 48% of the company's total net revenue while international revenues grew 2.8% to $168.9 million.
Revenues were driven by double-digit sales growth in China and Western Europe during the quarter. However, the company experienced persistent softness in certain key emerging markets as a result of unfavorable foreign exchange and political issues.
Revenues from In-Vitro Diagnostic Products (IVD) went up 11.5% to $92.5 million, driven by robust reagents sales which accounted for 44.2% of the segment’s net revenue. In addition to reagents, high-end hematology and high-speed biochemistry analyzers also performed well in China, reflecting growth of a healthy recurring revenue stream in the IVD segment.
Revenues from both Patient Monitoring & Life Support Products and Medical Imaging Systems improved 7% year over year to $118 million and $82.5 million, respectively. Revenues from Others (including sales from the orthopedics business, service revenues from extended warranties, sales of accessories and repair service revenues for post-warranty period) spiked 22% to $31.6 million in the quarter under review.
Adjusted gross profit rose 10.5% year over year to $184.6 million while adjusted operating earnings went down 9.2% year over year to $49.5 million.
As of Sep 30, 2014, Mindray Medical had $972.9 million in cash, cash equivalents and short-term investments, compared with $915.6 million as of Jun 30, 2014.
Cash flow from operating activities improved marginally to $85.5 million from $84.6 million at the end of the previous quarter. In the first nine months of 2014, cash flow from operations totaled $189.8 million as compared with $185.7 million in the year-ago period.
2014 Guidance
Mindray Medical slashed its 2014 financial guidance in the face of increasing uncertainties in currency and other macro developments that could impact its performance in certain key markets.
The company expects 2014 net revenue growth below 10% over 2013, lower than the earlier growth guidance of at least 10%. The Zacks Consensus Estimate for the same is currently pegged at $1,349 million. The company apprehends 2014 adjusted net income to decrease by mid-single digits over 2013.
Capital expenditure is expected around $110 million for 2014, as against the prior expectation of $130 million.
Our Take
Mindray Medical posted decent year-over-year growth in revenues during the third quarter of 2014. However, we are disappointed with the year-over-year fall in earnings. Also, the lowered guidance for 2014 fails to indicate any near-term catalyst that may improve the scenario in the upcoming period.
Though sales in China picked up during the quarter, the company continues to face persistent weakness in certain emerging markets due to unfavorable currency fluctuations and political tensions.
Currently, Mindray Medical carries a Zacks Rank #3 (Hold). Better-ranked stocks in the medical instruments industry include AngioDynamics Inc. (ANGO), Fluidigm Corporation (FLDM) and ABIOMED, Inc. (ABMD). While AngioDynamics and Fluidigm sport a Zacks Rank #1 (Strong Buy), ABIOMED carries a Zacks Rank #2 (Buy).
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