We reaffirm our Neutral recommendation on resuscitation devices maker ZOLL Medical (ZOLL). Revenues and earnings for third-quarter fiscal 2011 outperformed the Zacks Consensus Estimates driven by strong contributions from the company’s flagship LifeVest wearable defibrillator and temperature management businesses, backed by healthy growth in the North American hospital market.
Revenues from ZOLL Medical’s North American hospital market surged 19% year over year as sales from its U.S. military business more than doubled year over year in the third quarter. However, the company’s North American pre-hospital market remains sluggish due to a still weak hospital capital spending backdrop with sales clipping 4% in the quarter.
The company’s LifeVest business remains on course for strong growth with sales zooming 67% in the quarter. AutoPulse and Temperature Management franchises performed strongly with revenues climbing 31% and 40%, respectively.
ZOLL Medical is a leading player in the global market for external defibrillators, which is worth more than $1 billion. The company is the innovator of 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. Its international sales cruised 29% in the third quarter. Moreover, ZOLL Medical remains committed to expanding its product range to sustain growth in the U.S. defibrillation market.
LifeVest is the cornerstone of ZOLL Medical’s growth story. The device has been already prescribed to over 40,000 patients (at high risk of sudden cardiac arrest) and all the top hospitals in each of the 52 metropolitan areas in the U.S. Moreover, the company’s Propaq MD defibrillator and the Propaq M heart monitor represent a major boost for its military-focused business.
ZOLL Medical’s recent distribution pact with Tokyo-based Asahi Kasei Corporation for its AED Plus devices represents a major achievement as it will unlock additional opportunities for growth in the key and lucrative Japanese market. ZOLL Medical is also offering a new version of AED Plus that is fully compliant with the new American Heart Association (“AHA”) and European Resuscitation Council (“ERC”) guidelines.
We believe that ZOLL Medical’s wide product range coupled with its expansion initiatives should push growth moving forward. Similar to LifeVest, the company’s temperature management business is emerging as a meaningful contributor to its sales and margins.
However, ZOLL Medical operates in a highly competitive U.S. defibrillation market. It competes with Physio-Control, a wholly-owned unit of Medtronic (MDT) and Philips (PHG). Moreover, the North American emergency medical services (“EMS”) market remains sluggish due to tight budgets for equipment purchases.
MEDTRONIC (MDT): Free Stock Analysis Report
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ZOLL MEDICAL CO (ZOLL): Free Stock Analysis Report
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