Greatbatch Tops Ests, Reaffirms - Analyst Blog
May 02 2011 - 6:15AM
Zacks
Greatbatch (GB)
reported first-quarter fiscal 2011 adjusted (excluding one-time
items) earnings per share of 46 cents, topping the Zacks Consensus
Estimate of 39 cents and the year-ago earnings of 32 cents. Profit
(as reported) more than doubled year over year to $11.9 million (or
51 cents a share) as the Clarence, New York-based company’s
revenues increased at a double-digit clip.
Revenues
Revenues soared 13% year over year
to $148.8 million led by solid growth across the company’s Vascular
Access, Orthopedic and Electrochem businesses. Sales outpaced the
Zacks Consensus Estimate of $136 million. Foreign currency
movements favorably impacted sales in the
quarter.
Results by
Segment
The company’s core Greatbatch
Medical division posted sales of $128.1 million, a surge of 12%
year over year. Solid growth across Orthopedic and Vascular Access
franchises was, in part, masked by a somewhat weak
CRM/Neuromodulation business.
CRM/Neuromodulation sales edged up
1% year over year to $78 million. The sluggish growth reflects
sustained pricing pressure and general softness in the market.
Orthopedic revenues cruised 34% to
$39.6 million as a recovery in the orthopedic market coupled with
customer inventory build-up/product launches boosted growth across
all product lines. Moreover, favorable foreign exchange translation
supported the growth. Revenues from the Vascular Access business
sailed 28% to $10.5 million owing to higher introducer sales.
Revenues from Greatbatch’s
Electrochem segment climbed 19% to $20.7 million as customers in
the energy markets raised their inventory levels in the
quarter.
Margins
Gross margin rose marginally to
31.7% from 31.6% a year ago as higher revenues were partly
offset by unfavorable sales mix and pricing concessions made to
customers. Selling, general and administrative expenses, as a
percentage of sales, increased to 12.5% from 11.9% in the
prior-year quarter. Adjusted operating margin improved to 12.6%
from 11.4% a year ago.
Financial
Condition
Greatbatch ended the first quarter
with cash and cash equivalents of roughly $51.7 million, down 8%
year over year. Operating cash flows for the first quarter climbed
18% year over year to $25 million. Total long-term debt reduced
roughly 15% year over year to $223.1 million.
Outlook
Greatbatch has backed its
financial
forecasts for fiscal 2011 issued at the beginning of the year. The
company projected revenues between $540 million to $560
million for the year along with adjusted earnings per share of
$1.55 to $1.65. Adjusted operating margin for 2011 was forecast in
the range of 12% to 13%.
The company added that, based on
the first quarter results and its expectations for the rest of
2011, the results are trending towards the top end of its guidance
ranges. The current Zacks Consensus Estimates for revenue and
earnings per share for fiscal 2011 are $552 million and $1.64,
respectively.
Greatbatch is a leading producer
and supplier of batteries, capacitors and components used in
implantable medical devices. It has been acquiring complementary
businesses over the last few years to boost sales. The company’s
top customers include Boston Scientific (BSX),
Johnson & Johnson (JNJ),
Medtronic (MDT) and St. Jude
Medical (STJ).
We feel that operating results,
moving forward, would be supported by the rebound across the
Orthopedic and Vascular operations. Moreover, synergies from
cost-cutting and restructuring initiatives are expected to support
margin expansion. However, a soft CRM market and pricing pressure
remain headwinds. Currently, we are Neutral on the stock.
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