On Jan 21, we issued an updated research report on Greatbatch, Inc. (GB). We feel Greatbatch remains focused on growth via strategic investments, manufacturing efficiencies, operating cost curtailments. However, a weak portable medical product line, coupled with foreign currency headwinds, continues to trouble the company.
Greatbatch continues to invest heavily in research and development (R&D) in order to develop innovative medical devices, which will help the company gain a significant foothold in the competitive medical device market.
Greatbatch also boasts an encouraging product pipeline. A number of products are currently in development and are expected to support growth in the long run.
The most notable among these is the Algovita spinal cord stimulator for chronic pain treatment in the trunk and limbs. Algovita received the CE Mark in Jun 2014 and is now in the early commercialization planning stage in Europe. New products targeted for the vascular, CRM/neuromodulation and orthopedic markets are also expected to offer incremental revenue opportunity, going forward.
Greatbatch has always followed a strategy of acquiring complementary businesses that helps to add new proprietary technologies, manufacturing capabilities, and development resources. The recent acquisition of CCC Medical in Aug 2014, in particular, has greatly enhanced the company’s medical device innovation efforts.
However, Greatbatch generates a significant portion of its revenues from the international market. Thus, unfavorable foreign currency fluctuations pose a major threat in the near term.
Also, Greatbatch’s smaller Electrochem division is still generating lower revenues from its portable medical, environmental and military customers. This is primarily due to the company’s increased pricing discipline, as well as reduced government funding on certain military and environmental projects. This too remains a weak spot, going forward.
Zacks Rank
Currently, Greatbatch carries a Zacks Rank #3 (Hold). Better-ranked stocks in the broader medical sector include Inogen (INGN), Synergetics USA (SURG) and ABIOMED (ABMD). While Inogen and Synergetics sport a Zacks Rank #1 (Strong Buy), ABIOMED carries a Zacks Rank #2 (Buy).
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