CONMED Corporation CNMD reported first-quarter 2018 adjusted earnings per share of 53 cents, beating the Zacks Consensus Estimate by 23.3%. Adjusted earnings also improved 39.5% year over year.
Revenues came in at $202.1 million, outpacing the Zacks Consensus Estimate by 2.6%. Revenues increased 8.3% year over year as reported and 6.8% at constant currency (cc).
CONMED’s domestic revenues in the reported quarter, which represents 52.6% of total revenues, rose 6.9% on a year-over-year basis, courtesy of growth in both General Surgery and Orthopedics. Internationally, revenues increased 10% as reported and 4.7% at cc, representing 47.4% of total revenues.
Meanwhile, in the past three months, CONMED has rallied 10.2%, outperforming the industry’s decline of 11.4%.
CONMED Corporation Price, Consensus and EPS Surprise
CONMED Corporation Price, Consensus and EPS Surprise | CONMED Corporation Quote
Segment Details
Orthopedic Surgery
Orthopedic surgery accounted for 53.9% of the company’s revenues in the quarter. The segment registered revenues worth $108.9 million, up 4.9% on a year-over-year basis, driven by robust growth in capital sales.
Domestically, Orthopedics revenues recorded growth in two consecutive quarters after a long time. Internationally, Orthopedics revenues increased 1.6% year over year, marking the eighth consecutive quarter of growth.
General Surgery
This segment contributed 46% to the quarter’s total revenues. For the quarter under review, the segment’s revenues came in at $93.2 million, up 12.6% year over year.
Per management, growth can be attributed to strong performances across the product portfolio. Furthermore, domestically, first-quarter General Surgery sales increased to 12.8%, and internationally, General Surgery sales rose 12.1%.
Margins
Adjusted gross margin increased 50 basis points (bps) year over year to 54.2% of revenues. Gross profit rose 9.7% on a year-over-year basis.
Adjusted EBITDA margin in the first quarter was 17.1%, compared with 16.4% in the year-ago quarter. EBITDA grew 13.9% on a year-over-year basis.
Financial Condition
The company’s cash balance at the end of the first quarter was $21.1 million, compared with $32.6 million in the prior-year quarter.
Cash flow from operations was $25 million in the first quarter of 2018 compared with $15.3 million in the prior-year quarter.
Long-term debt at the end of the quarter was $442.4 million, down 6.2% sequentially.
View Raised
Encouraged by the solid first-quarter performance, CONMED raised its financial guidance.
The company now expects full-year 2018 constant-currency sales growth in the range of 4.5% to 5.5%, higher than the previous range of 4.0% to 5.0%. Notably, the Zacks Consensus Estimate for 2018 revenues is pegged at $831.2 million.
Adjusted net earnings per share are expected within $2.15-2.20, compared to the earlier $2.11-2.17. This shows 14% to 16% growth over 2017. Notably, the Zacks Consensus Estimate of $2.14 is below the guidance.
Additionally, management expects full-year gross margin to improve 50 to 100 bps, primarily driven by the company’s cost-saving initiatives.
Full-year R&D expenses are expected in the range of 4.5-5% as a percentage of total revenues.
Our Take
CONMED exited the first quarter of 2018 on strong top-line growth and margin expansion. Domestic and international revenues witnessed solid year-over-year growth across the company’s core segments. Orthopedic revenues outside the United States surged for the eighth consecutive quarter, which deserves a special mention. Long-term debt at the end of the quarter was also high, raising concerns.
Zacks Rank & Key Picks
CONMED carries a Zacks Rank #4 (Sell).
A few better-ranked stocks in the broader medical space, which reported solid earnings this season, are Laboratory Corporation of America Holdings LH, Chemed Corp. CHE and Intuitive Surgical, Inc. ISRG. While Intuitive Surgical sports a Zacks Rank #1 (Strong Buy), LabCorp and Chemed carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
LabCorp reported first-quarter 2018 adjusted earnings per share of $2.78, beating the Zacks Consensus Estimate by 5.3%. Revenues came in at $2.85 billion, exceeding the Zacks Consensus Estimate of $2.78 billion.
Chemed posted first-quarter 2018 adjusted earnings per share of $2.72, surpassing the Zacks Consensus Estimate of $2.37. Revenues came in at $439.2 million, beating the Zacks Consensus Estimate of $420 million.
Intuitive Surgical reported first-quarter 2018 adjusted earnings of $2.44 per share, which beat the Zacks Consensus Estimate by 22.6%. Revenues totaled $848 million, also surpassing the Zacks Consensus Estimate by 10.6%.
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