On Nov 11, 2014, Zacks Investment Research downgraded Exactech Inc. (EXAC) to a Zacks Rank #5 (Strong Sell).
Why the Downgrade?
Exactech’s lackluster third-quarter 2014 results (reported on Oct 21), with both earnings and revenues missing expectations, have set a negative earnings estimate revision trend for the company.
For 2014, Exactech witnessed one downward estimate revision over the last one month, with no upward revision, causing the Zacks Consensus Estimate to drop roughly 5% to its current level of $1.15 per share. For 2015, one estimate moved south over the same time frame, leading to around 5% decline in the Zacks Consensus Estimate to $1.28 per share.
Third-quarter earnings of 21 cents a share declined 8.7% year over year, primarily hurt by unfavorable foreign exchange movements during the quarter. Earnings also missed the company’s guided range of 24–26 cents as well as the Zacks Consensus Estimate of 25 cents.
Revenues grew 4% year over year to $58 million but missed the Zacks Consensus Estimate of $59 million. Strength in the company’s Extremity implant business was partly offset by weak Knee implant revenues owing to sluggish knee implant sales in Europe and the U.S.
Exactech also slashed its 2014 earnings and revenue guidance. The company now expects annual earnings in the range of $1.14–$1.16 per share, lower than the earlier projection of $1.19–$1.23. The current Zacks Consensus Estimate of $1.15 lies within the new range.
Annual revenues are projected in the band of $247–$249 million, lower than the prior projection of $249–$253 million. The current Zacks Consensus Estimate of $249 million coincides with the upper end of the new range.
Stocks to Consider
While we choose to avoid Exactech at present, better-ranked stocks include Idexx Laboratories (IDXX) and Natus Medical (BABY) in the medical instruments industry and ICU Medical (ICUI) in the medical products industry. While ICU Medical sports a Zacks Rank #1 (Strong Buy), both Idexx Laboratories and Natus Medical carry a Zacks Rank #2 (Buy).
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