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CONMED (CNMD) Beats on Q1 Earnings, Raises '19 Guidance

Zacks Equity Research

CONMED Corporation CNMD reported first-quarter 2019 adjusted earnings per share of 57 cents, which beat the Zacks Consensus Estimate of 54 cents by 5.6%. Further, the figure improved 7.5% from the year-ago quarter.

The New York-based medical products manufacturer posted revenues of $218.4 million, up 8.1% on a year-over-year basis and 9.3% at constant currency (cc). Notably, the figure surpassed the Zacks Consensus Estimate of $213 million by 2.5%.

Segment Details

Orthopedic Surgery

Revenues in the segment totaled $113.4 million, up 4.1% from the year-ago quarter.

Domestically, Orthopedics revenues increased 4.9% from the prior-year quarter's level, while international sales rose 3.8%. Per management, growth was driven by strong performances of the product portfolio.

General Surgery

Revenues in the segment totaled $105 million, up 12.7% year over year.

Domestically, General Surgery sales improved 13.7% year over year and international sales increased 10.2%.

Sales by Geography

In the reported quarter, sales in the United States grossed $117 million, up 10.1% year over year. International sales climbed 5.8% to $101.4 million.

CONMED Corporation Price, Consensus and EPS Surprise

 

CONMED Corporation Price, Consensus and EPS Surprise | CONMED Corporation Quote

Margins

Gross profit in the quarter totaled $122.1 million, up 11.4% year over year. Per management, adjusted gross margin was 55.9%, expanding 170 bps.

Adjusted operating income came in at $11.6 million, down 32.6% year over year. Operating margin was 44.1%, down 320 bps year over year.

Financial Condition

Cash flow from operations in the first quarter was $3.9 million compared with $25 million in the year-ago quarter. Long-term debt at the end of the quarter was $803 million, up 82.9% from 2018-end level.

2019 Guidance Raised

CONMED expects 2019 sales growth in the range of 9-10% at cc. This projection includes an increase to its organic constant currency sales growth in the range of 5.25-6.25% and the addition of the Buffalo Filter buyout.

On the basis of current exchange rates, the negative impact to 2019 sales from forex is now anticipated to be about 75 bps, lower than the prior estimate of 100 bps.

The company forecasts adjusted diluted net earnings per share in the range of $2.47 to $2.52, up from the previously guided range of $2.42-$2.47. This indicates growth of 13-16% over 2018. Notably, the Zacks Consensus Estimate is pegged at $2.45, within the guided range.

Wrapping Up

CONMED exited the first quarter on a solid note, with earnings and revenues beating estimates. The company’s core units — Orthopedic Surgery and General Surgery— continue to boost the top line. Solid international sales growth is a positive. Management is confident of the product portfolio as well. It expects the buyout of Buffalo Filter (completed on Feb 11, 2019) to bolster CONMED’s General Surgery portfolio. Raised 2019 guidance buoys optimism in the stock. The company continues to expect investments in R&D to be between 4.5% and 5% of sales in 2019.

Meanwhile, contraction in the company's operating margin in the quarter remains a concern. CONMED operates in a highly competitive environment, especially with respect to the General Surgery business. The company’s high long-term debt is a concern.

Zacks Rank and Other Key Picks

CONMED currently carries a Zacks Rank #2 (Buy).

Investors interested in the broader medical space can consider some other top-ranked stocks like Bio-Rad Laboratories, Inc. BIO, ICU Medical Inc. ICUI and DENTSPLY SIRONA Inc. XRAY.

Bio-Rad is scheduled to release first-quarter 2019 results on May 8. The Zacks Consensus Estimate for the quarterly adjusted EPS is pegged at $1.12. The consensus estimate for revenues stands at $548.8 million. The stock sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here . 

ICU Medical is scheduled to release first-quarter 2019 results on May 9. The Zacks Consensus Estimate for the period’s adjusted EPS is pegged at $2.18. The consensus estimate for revenues stands at $321.1 million. The stock carries a Zacks Rank #2.

DENTSPLY SIRONA is slated to release first-quarter 2019 results on May 3. The Zacks Consensus Estimate for the quarterly adjusted EPS stands at 38 cents. The consensus estimate for revenues is pegged at $917.1 million. The stock has a Zacks Rank of 2.

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