C.R. Bard (BCR) Q1 Earnings, Sales Top; Currency Woes Stay - Analyst Blog
C.R. Bard Inc. BCR reported impressive first quarter of 2015 earnings results, wherein adjusted EPS of $2.10 exceeded the Zacks Consensus Estimate by 3 cents. EPS also improved 9.9% from the year-ago quarter driven by a 2.6% increase in net sales, which totaled $819.7 million and surpassed the Zacks Consensus Estimate of $817 million.
CR Bard Inc. - Earnings Surprise | FindTheCompany
At constant currency (cc), net sales increased 5% from the year-ago quarter while organic sales grew 5.3%. U.S. net sales improved 4%, while International sales declined 1% in the reported quarter. Excluding the impact of foreign exchange, international sales increased 8% over the prior-year quarter.
At cc, Europe, Japan and other international territories grew 1%, 5% and 18%, respectively.
Gore royalty revenues were approximately $38.4 million in the quarter under review.
Segment Details
Vascular product sales increased 5.8% year over year (10% at cc) to $231.9 million. Sales in the U.S. soared 8% whereas international sales were up 11%.
Sales from surgical graft went down 4% in the quarter. The Endovascular business sales grew 12%, excluding the royalty payment from Gore. Within the Endovascular business, peripheral PTA line sales jumped 32% driven by accelerating demand for the Lutonix drug-coated balloon in the U.S.
Sales from biopsy products climbed 9%, driven by healthy growth across the international businesses, particularly the emerging markets. Sales from the Stent business declined 10% in the quarter owing to pricing pressure while Vena cava filter line sales improved 6%.
Urology sales increased 2.1% from the year-ago quarter (5% at cc) to $205.6 million. Sales from the U.S. increased 4%, while it improved 6% internationally.
Within Urology, sales from the basic drainage business increased 4% globally and 2% in the U.S. Within this category, I.C. Foley's sales were up 1% globally but declined 2% in the U.S. Sales from the continence business increased 7% in the quarter.
Sales from neurological specialties declined 1% while that from the StatLock catheter stabilization line increased 5% in the reported quarter. Brachytherapy product sales decreased 4% globally.
Oncology sales increased 2.6% (5% at cc) to $224.6 million. Sales were up 1% in the U.S. and 15% outside the U.S. PICC sales grew 9% globally with continued strong performance in the U.S., Europe and the emerging markets. Port line sales were down 3% year over year due to significant pricing pressure in the U.S.
Meanwhile, sales from the Vascular Access ultrasound product line were up 12%. Lastly, sales from the dialysis catheter business rose 8% in the quarter.
Surgical Specialties sales increased 0.5% (3% at cc) to $135.9 million. U.S. sales increased 5% while international sales were down 4%. The international sales decline was mainly owing to a 34% global decline in the performance irrigation business due to the discontinuation of certain products in this category.
Sales from the soft tissue repair business grew 5%. Within soft tissue, synthetic hernia products sales grew 8% from the year-ago quarter. However, CR Bard reported a decline of 7% from its hernia fixation business.
Sales from the Other product line decreased 11.4% to $21.7 million.
Financial Position
Bard exited the first quarter with cash, restricted cash and short-term investments of $1.03 billion, higher than $1.01 billion as of Dec 31, 2014. Total debt stood at $1.6 billion as of Mar 31, 2015, higher than $1.5 billion as of Dec 31, 2014.
Product/Clinical Trial Update
Bard launched several new products in the first quarter of 2015 and has a healthy pipeline going forward. The company is making significant progress with its drug-coated balloon and expects to launch additional sizes and indications in the second half of the year.
Currently, its drug-coated balloon product is undergoing the Levant 2 Japan study. The company expects to submit clinical data from the study by late 2015 for approval in Japan. CR Bard expects to begin its Levant China studies with enrollment to start in the second half of 2015.
In Vascular, the company expects to complete enrollment in the LifeStream Balloon Expandable Covered Stent studies by the end of 2015. Further, enrollment is going on in the IDE study to support an iliac artery disease indication in the U.S.
Under the Urology segment, the company initiated the rollout of its new skyline sub 2 French stone basket family and is currently working on expanding the platform with two new versions expected to be launched later this year.
The company recently received U.S. regulatory approval for the freehand stereotactic system for Vascular Access named Pinpoint GT. Bard plans to expand its PICC product portfolio over the second half of 2015 and 2016.
The company expects to submit antimicrobial PICC in the third quarter of 2015 for regulatory clearance and eventual launch upon approval. This first product will be followed by a series of launches to support coated PICCs in both PowerPICC and PowerPICC SOLO configurations in the second half of 2016.
In Dec 2014, Bard launched its first antibiotic-coated biologic mesh, XenMatrix AB. The company expects to receive a Pre-market Approval (PMA) for its Progel sealant in the first half of this year. Other products in the pipeline include TRIDYNE vascular sealant and spring-loaded resorbable tack device named OPTIFIX.
Outlook
For the second quarter of 2015, Bard expects adjusted EPS in the range of $2.15 to $2.19. Also, the company expects sales growth between 4.5% and 5.5% for the quarter at cc as well as on an organic basis. Foreign currency volatility is expected to negatively impact sales by approximately 4%.
The company reiterated its full-year 2015 guidance provided last quarter. Adjusted EPS is forecasted in the range of $8.95 to $9.05 while organic sales growth is expected between 4% and 5% at cc for 2015. Foreign currency volatility is expected to negatively impact sales by approximately 4% as against the earlier projection of 3%.
For 2015, Bard forecasts Vascular sales growth between 3% and 7%; Urology between 1% and 4%; Oncology between 3% and 6%; and Surgical Specialties business between 3% and 6%. The company expects to shift its portfolio to faster growing geographies through its continuing investments in emerging markets.
Our Take
Bard has an extensive product portfolio and a healthy pipeline which, we believe, are key growth factors. The early market acceptance of the company’s Lutonix DCB has been impressive and in our opinion the company will witness an expanded adoption of this technology as the market continues to mature.
Bard’s continued investments in the emerging markets has strengthened its position internationally and is increasingly delivering accretive returns. In our opinion, investments in new product development and strong growth from emerging markets will help the company boost revenues in the long run.
However, the company witnessed significant pricing pressure in the U.S. during the first quarter which is expected to persist over the next couple of quarters. Also, the recent foreign currency movements are likely to impact sales in the near term. Stiff competition and sluggish hospital spending environment are added concerns.
Stocks to Consider
Currently, C.R. Bard carries a Zacks Rank #3 (Hold).
Better-ranked stocks in the medical/dental supplies industry include Merit Medical Systems MMSI, AmerisourceBergen Corp. ABC and Becton, Dickinson and Company BDX. While Merit Medical Systems sports a Zacks Rank #1 (Strong Buy) both AmerisourceBergen and Becton, Dickinson carry a Zacks Rank #2 (Buy).
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