Resuscitation devices maker ZOLL Medical’s (ZOLL) third-quarter fiscal 2011 (ended July 3) earnings per share of 42 cents outpaced the Zacks Consensus Estimate of 35 cents and the year-ago earnings of 26 cents. Profit shot up 65% year over year to $9.5 million boosted by solid growth in sales.
Revenues surged 22% year over year to $136.2 million, topping the Zacks Consensus Estimate of $130 million. Growth was led by strong revenues from the company’s LifeVest wearable defibrillator and temperature management businesses, backed by healthy growth in the North American hospital market. Total order backlog more than doubled year over year to $32 million at the end of the quarter.
Sales to the North American hospital market jumped 19% year over year in the quarter, buoyed by solid revenues from the company’s U.S. Military business which skyrocketed 118% year over year to $7.4 million.
However, ZOLL Medical’s North American pre-hospital market remains soft with revenues dipping 4% year over year to $33.2 million. The North American pre-hospital market is expected to remain sluggish through fiscal 2011, partly due to a still weak capital spending environment. International sales zoomed 29% to $37.5 million.
ZOLL Medical’s LifeVest business continues its strong growth momentum with revenues soaring 67% year over year to $30 million. AutoPulse cardiac support pump delivered strong growth in the quarter with sales of $5 million, a 31% year over year surge. Temperature Management business again performed strongly with sales zooming 40% of $7 million.
Gross margin rose to 58% in the quarter from 54% a year-ago, benefiting from a better mix of higher margin LifeVest sales and improved pricing in North America. Total expenses surged roughly 22.7% year over year to $65.7 million. ZOLL Medical ended the quarter with cash and cash equivalents and short-term investments of roughly $60.8 million, down 3.8% year over year, with no debt.
ZOLL Medical is a leading player in the global market for external defibrillators, a market worth more than $1 billion. In the U.S. defibrillation market, the company competes with Physio-Control, a wholly-owned unit of Medtronic (MDT), and Philips (PHG).
The company has innovated a wide range of product features that have become the standard of care in the external defibrillator industry. To boost growth, ZOLL Medical is expanding its footprint in the international markets and broadening its product range.
ZOLL Medical’s solid fundamentals, its broad product range, healthy revenue/margin mix and upbeat prospect for LifeVest remain encouraging. The company has completed multiple acquisitions in the past and is seeking more such lucrative transactions to aid growth.
However, ZOLL Medical operates in a highly competitive defibrillation market In the U.S. Moreover, the North American emergency medical services (“EMS”) market remains sluggish, in part, due to budget constraints. Currently, we have a Neutral recommendation on ZOLL Medical.
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