Wright Medical Rises on OrthoRecon Sale

Zacks

Shares of global orthopaedic device company Wright Medical Group, Inc. (NASD:WMGI) rose 2.6% till date since the company announced the closure of its divestment of OrthoRecon business to MicroPort Scientific Corporation and its affiliates.

In Jun 2013, WMGI announced its decision to sell off the OrthoRecon unit, which includes products primarily to replace or repair knee, hip and joints that have deteriorated or have undergone damage through disease or injury. Management had classified the OrthoRecon segment as a discontinued operation, effective from the second quarter of 2013.

Currently, Wright Medical’s corporate headquarters and U.S. operations are located in Arlington, Tenn. Following the closure of the sale of OrthoRecon, the company will move its corporate headquarters to Memphis, Tenn.

WMGI’s decision to sell off its OrthoRecon unit bodes well for the company. The division was witnessing weak demand along with pricing and volume pressure in the underlying orthopedic market. With the sell-off, Wright Medical plans to pursue growth in the Biologics and Extremities businesses in the global market.

Wright Medical failed to impress investors with its third-quarter results. The company posted a wider loss of $8.2 million or 18 cents per share for the quarter compared with $1.6 million or 4 cents in the same quarter of 2012. However, the results met the Zacks Consensus Estimate.

Reported net loss was $124.5 million or $2.68 per share, compared with $4.1 million or 11 cents in the third quarter of 2012. Net revenue increased 13.3% (14% in constant currency) to $57.6 million during the quarter, exceeding the Zacks Consensus Estimate of $56.0 million.

While announcing the third quarter results, WMGI narrowed its revenue guidance for 2013 to $237–$240 million from $235–$240 million, incorporating short-term dis-synergies due to the transaction with MicroPort. The Zacks Consensus Estimate of $239 million for the year lies within the guided range.

However, Wright Medical reiterated its 2013 adjusted earnings per share guidance of a loss of 55 to 59 cents, based on approximately 45.3 million shares outstanding. The Zacks Consensus Estimate of a loss of 57 cents for the year lies within the guided range.

Currently, WMGI retains a Zacks Rank #3 (Hold). The company expects to release its fourth-quarter and full-year results on Feb 24, 2014.

Some better-ranked stocks in the medical product industry include Advaxis, Inc. (NASD:ADXS), CareFusion Corporation (NYSE:CFN), and Covidien plc (NYSE:COV). All these stocks carry a Zacks Rank #2 (Buy).
 

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