We reiterate our Neutral rating on CR Bard Inc. (BCR). Its first quarter fiscal 2012 adjusted earnings of $1.61 per share beat the Zacks Consensus Estimate of $1.57. Revenues increased 4% (up 5% in constant currency) year over year to $730 million, but fell short of the Zacks Consensus Estimate of $733 million. Year-over-year revenue growth was triggered by healthy sales across the company’s Vascular and Oncology businesses especially in international markets.
The company’s resource depth and focused innovation are its major competitive advantages.The launch of Dignishield fecal management system in the urology division was the most important product launch in the first quarter of 2012 as the company hopes that this offering will revive the declining continence business. Bard has recently introduced Conquest HP 40 PTA catheter, Phasix mesh material used in surgery and the Xenmatrix xenograft in the market.
C.R. Bard has a reasonably strong pipeline with a substantial number of projects in each business segment. C.R. Bard received CE Mark approval for its Sherlock 3CG tip confirmation technology with an expanded label and expects to launch it in Europe either in late second quarter or early third quarter 2012. Fluency Plus stent grafts and Denali vena cava filters are expected to be rolled out toward the end of 2013 or early 2014. Site-Rite Prevue ultrasound system, Fazer stereotactic system, Perfix plug design, Ventralight ST ventral hernia repair are some of the other products that the company is looking forward to launch in the near term.
The company has embarked on a four-point growth strategy. Its strategy includes sales force expansion, complementary product acquisitions, increased internal product development and cost control. The company continues to successfully execute this strategy with sustained research and development (R&D) investment producing new high-margin products, enhanced by key acquisitions and divestitures and a larger sales force. In this regard, we view that the acquisition of Medivancebodes well with C.R. Bard’s business model and will boost its offerings in the critical care settings. Moreover, C.R. Bard bought medical devices maker ClearStream Technologies last year. The company expects these deals to be accretive to its earnings in 2012. More recently, C.R. Bard scooped up Lutonix Inc. The acquisition will enable it to expand into the large and lucrative market for drug-coated balloons.
The pricing environment has been lackluster for most of the devices offered by the company due to competition and a soft hospital equipment purchase backdrop. The constant flow of new products makes price increases on older products difficult. However, newer products are generally priced at some premium to existing models. Government-mandated healthcare reform in the U.S. has led to a less flexible pricing environment and may pressure prices across the board. Moreover, the company continues to face procedure volume headwind in the domestic market.
C.R. Bard is exposed to competition from large manufacturers with multiple business lines to smaller manufacturers that offer a limited selection of products, and to a limited extent, to reprocessors of single-use medical devices. Competition has increased across several businesses, especially in hernia fixation business. Some of the larger competitors include Cordis, Boston Scientific (BSX) and AngioDynamics (ANGO).
Our recommendation on the stock is supported by a short-term Zacks #3 Rank (Hold).Read the Full Research Report on BSX
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