We reiterate our Neutral recommendation on medical technology company Conmed Corporation (CNMD) following its mixed third-quarter 2011 results. Its adjusted earnings of 33 cents beat the Zacks Consensus Estimate by a couple of cents. Profit dipped 6% year over year, hurt by restructuring costs.
Revenues rose just 0.3% year over year to roughly $173 million, missing the Zacks Consensus Estimate. Sales grew modestly as gain in the disposable business was offset by lower capital equipment sales.
The company witnessed growth across its Arthroscopy and Endosurgery franchises while Electrosurgery and Endoscopic Technologies businesses posted lower sales in the quarter. Powered Surgical Instruments sales rose marginally. Management’s cost-cutting initiatives contributed to an expansion in the operating margin.
Conmed tightened its fiscal 2011 adjusted earnings per share forecast. Moreover, it has lowered its sales forecast for the year given the still challenging hospital capital purchasing backdrop and a less favorable foreign exchange environment. Conmed expects sales in the fourth quarter to be higher sequentially on account of seasonality.
Conmed is a medical products maker specializing in surgical instruments and devices. The company is experiencing healthy demand for its single-use disposable products, which remain the mainstay of its business.
A large percentage of the company’s products are designed for minimally invasive surgery, a trend that is extremely popular these days. The use of minimally invasive surgery lowers costs by reducing patient trauma, recovery time and the length of hospitalization.
However, Conmed operates in a highly-competitive orthopedic surgery market against much larger, more technically-competent companies, such as Johnson & Johnson (JNJ), Smith & Nephew (SNN) and Stryker Corporation (SYK).
The orthopedic industry is highly susceptible to the economic softness and Conmed is no exception. Moreover, it is exposed to pricing pressure, currency exchange headwinds and a still weak hospital capital purchasing environment.
CONMED CORP (CNMD): Free Stock Analysis Report
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STRYKER CORP (SYK): Free Stock Analysis Report
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