Greatbatch Reaffirmed at Neutral - Analyst Blog
August 08 2011 - 1:59PM
Zacks
We reiterate our Neutral recommendation for Greatbatch
Inc. (GB). Second-quarter fiscal 2011 earnings per share
of 43 cents met the Zacks Consensus Estimate. Revenues rose 4% year
over year to $146.5 million, topping the Zacks Consensus Estimate
of $141 million.
Sales were boosted by solid double-digit growth at the company’s
Orthopedic franchise backed by favorable foreign exchange
translation, which offset declines across other businesses.
Greatbatch lifted its revenue and earnings forecast for the full
year.
Orthopedic revenues surged 24% in the quarter, fueled by
customer product launches, market share gains as well as favorable
foreign currency impact. Vascular Access sales fell 2% while
CRM/Neuromodulation revenues edged down 1%, hurt by sustained
pricing pressure and sluggishness in the CRM market. Revenues from
Greatbatch’s Electrochem segment dipped 2% in the quarter.
Greatbatch de-leveraged its balance sheet during the second
quarter by repaying long-term debt worth $20 million. The company
plans to continue to use its cash flows to fund R&D initiatives
and repay
debt.
Greatbatch is a leading producer and supplier of batteries,
capacitors and components used in implantable medical devices. The
company’s top customers include Boston Scientific
(BSX), Johnson & Johnson (JNJ),
Medtronic (MDT) and St. Jude
(STJ).
Greatbatch has been acquiring complementary businesses over the
last few years to boost sales. Moreover, the company’s pipeline is
healthy with a number of products currently under development
that are expected to support growth in the long run. Greatbatch
continues to invest in developing medical devices for its major OEM
clients.
A rebounding orthopedic market, market share gains coupled with
customer inventory build-ups and product launches are contributing
to growth in the company’s Orthopedic business. Greatbatch expects
these factors to continue to boost its orthopedic sales through
2011.
We feel that operating results, moving forward, will be supported by the
company’s strong Orthopedic business and strategic
investments. Moreover, synergies from cost-cutting and
restructuring initiatives are expected to support margin
expansion.
However, a soft CRM market may prove to be challenging for
Greatbatch for the remainder of 2011. We are also cognizant of the
pricing headwind. Our recommendation on the stock is backed by a
short-term Zacks #3 Rank (Hold).
BOSTON SCIENTIF (BSX): Free Stock Analysis Report
GREATBATCH INC (GB): Free Stock Analysis Report
JOHNSON & JOHNS (JNJ): Free Stock Analysis Report
MEDTRONIC (MDT): Free Stock Analysis Report
ST JUDE MEDICAL (STJ): Free Stock Analysis Report
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