Good news for Conmed Corporation’s (CNMD) investors as its Board recently declared the commencement of a quarterly cash dividend. The move is based on the company’s confidence in generating sustainable healthy profits and cash flows.
The New York-based medical technology company has announced an initial quarterly dividend of 15 cents a share. Annualized, this equates to a payout of 60 cents, translating into a dividend yield of roughly 2.1% based on Conmed’s current stock price. The initial quarterly dividend will be paid on April 5, 2012, to shareholders of record as on March 15, 2012.
Conmed is a medical products maker specializing in surgical instruments and devices. The company is experiencing healthy demand for its single-use disposable products, which remain the mainstay of its business. A large percentage of the company’s products are designed for minimally invasive surgery, a trend that is extremely popular these days.
The company posted mixed results in fourth-quarter 2011 with adjusted earnings of 46 cents per share topping the Zacks Consensus Estimate of 39 cents while revenues (of $185.6 million) missing the forecast. Sales grew narrowly in the quarter as gain in the disposable business was offset by lower capital equipment revenues.
Conmed raised its guidance for fiscal 2012 and now envisions sales of $780 million to $790 million compared with its earlier view of $745 million to $755 million. Adjusted earnings target for fiscal 2012 have been lifted to a band of $1.75 to $1.88 from the prior forecast of $1.60 to $1.70, a 17%-25% year-over-year growth.
We are encouraged by the company’s recent distribution deal with Musculoskeletal Research Foundation (“MTF”) in sports medicine. Moreover, its recently launched products (including the Hip Preservation System and Hall Lithium Power Battery System) are expected to drive top-line growth in the years ahead.
However, Conmed operates in a highly-competitive orthopedic surgery market against much larger, more technically-competent companies, such as Johnson & Johnson (JNJ), Smith & Nephew (SNN) and Stryker Corporation (SYK).
The orthopedic industry is highly susceptible to the economic softness and Conmed is no exception. Moreover, it is exposed to pricing pressure, currency exchange headwinds and a still weak hospital capital purchasing environment. We currently have a Neutral rating on Conmed. The stock currently retains a short-term Zacks #2 Rank (Buy).
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