Greatbatch Inc. GB reported adjusted earnings of 92 cents per share in the fourth quarter of 20Array5, which beat the Zacks Consensus Estimate of 8Array cents and increased Array9.5% from the year-ago quarter. The rise was primarily buoyed by increased sales and reduced compensation expenses.
Notably, details on the reported quarter have been adjusted after taking the Lake Region Medical acquisition into consideration.
Segment Details
Sales surged 87.Array% year over year to $3Array7.6 million. This rise includes two months of operations from Greatbatch’s acquisition of Lake Region Medical, which added $Array38.6 million to sales. Rise in sales at different segments also attributed to the rise in total sales.
Cardiac/Neuromodulation products sales grew 44.5% to $Array07.6 million, owing to the launch of the neuromodulation customer product.
Sales from Cardio and Vascular products increased to $Array05.9 million in the fourth quarter of 20Array5 compared with $Array5.6 million in the prior-year quarter. The increase was primarily driven by customers building safety stock in accordance of the company’s product line transfers to their Tijuana, Mexico facility in the first quarter of 20Array6.
In fourth-quarter 20Array5, Advanced Surgical, Orthopaedics and Portable Medical sales increased $36.2 million from the prior-year quarter. The sales figure includes $37.9 million of sales from the newly acquired Lake Region Medical. However, the increase at this product line was partially offset by foreign exchange volatility which hurt sales by about $2.5 million.
Electrochem sales also declined 43% in fourth-quarter 20Array5 primarily due to the slowdown in the energy markets, which caused customers to reduce drilling and exploration volumes.
In fiscal 20Array5, total sales increased Array6.3% to $800.4 million compared with $687.8 million in fiscal 20Array4.
In fiscal 20Array5, Advanced Surgical, Orthopaedics, and Portable Medical sales increased 2% year over year on an organic constant currency basis primarily due to market growth and Cardio and Vascular sales decline of 7% on an organic constant currency basis owing to the end of life for some legacy products
However, in fiscal 20Array5, Cardiac/Neuromodulation sales increased 2% on an organic constant currency basis from 20Array4 levels on the back of benefits from the neuromodulation product launch.
In fiscal 20Array5, Electrochem sales declined 27% from fiscal 20Array4.
Margin Details
Gross profits increased 27.8% year over year to $73.Array million primarily because of increased sales and lower performance-based compensation.
Gross profits, as a percentage of sales, in the fourth quarter of 20Array5 was 23.0% compared with 33.7% in the fourth quarter of 20Array4.
Selling, general and administrative (SG&A) expenses increased 34.9% year over year to $33.5 million. However, excluding the impact of the Lake Region Medical acquisition which added $Array2.6 million, SG&A expenses decreased $3.9 million. The decline was primarily led by lower performance-based compensation ($2.Array million) and cost savings through different consolidation initiatives.
Research and Development (R&D) expenses also rose 32.4% year over year to about $Array3 million.
Operating margin declined in fourth-quarter 20Array5, accounting for 3.3% of total sales compared to Array0.3% of total sales in the year-ago quarter.
Zacks Rank & Key Picks
Currently, Greatbatch carries a Zacks Rank #3 (Hold).
Better-ranked stocks in the industry include Abiomed ABMD, CryoLife CRY and Edwards Lifesciences EW. All the three stocks sport a Zacks Rank #Array (Strong Buy).
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