On Jul 4, 2013, we reiterated our Neutral recommendation on CONMED Corporation (CNMD) following its moderate first-quarter results. Although the company is aggressively trying to curtail costs and leverage operational activities, weakness in the global healthcare market concerns us.
Why the Retention?
CONMED reported first-quarter 2013 adjusted earnings per share (excluding one-time expenses) of 45 cents, in line with the Zacks Consensus Estimate and up 4.7% year over year. The upside was led by improvement in gross margin. However, revenues in the quarter dropped 3.8% year over year to $187.0 million. Revenues missed the Zacks Consensus Estimate of $201 million by 7%.
Following the release of the quarterly results, the Zacks Consensus Estimate for 2013 remains unchanged at $1.85 per share. However, the Zacks Consensus Estimate for 2014 increased 3.5% to $2.08.
CONMED has reshuffled its business segments following the Viking acquisition. The Viking acquisition further enhances its portfolio for minimally invasive products. New product launches should boost sales. Further, the ongoing consolidation and restructuring activities should result in savings.
However, we are aware that CONMED competes against bigger companies in a competitive orthopedic surgery market while capital purchasing environment remains weak. The current difficult global health care utilization trends are adversely affecting the business. Pricing and volume pressure also remain headwinds for the company.
Other Stocks to Consider
The company carries a Zacks Rank #3 (Hold). While we remain on the sidelines regarding CONMED, companies like Becton, Dickinson and Company (BDX), The Cooper Companies (COO) and West Pharmaceutical Services (WST) are expected to do well in the medical/dental supply industry. All these stocks carry a Zacks Rank #2 (Buy).
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