CONMED Corporation CNMD is well poised for growth backed by broad product portfolio, strong international sales and solid gain from core units — Orthopedic Surgery and General Surgery. However, forex remains a concern.
Shares of CONMED have lost 29.6%, compared with the industry’s decline of 8.2% on a year-to-date basis. Meanwhile, the S&P 500 Index fell 10.6% in same timeframe.
The company, with a market capitalization of $2.24 billion, is a major medical products manufacturer specializing in surgical instruments and devices for minimally invasive procedures and monitoring. It anticipates earnings to improve 14.9% over the next five years. Moreover, it has beat estimates in the trailing four quarters by 5.8%, on average.
Let’s take a closer look at the factors that substantiate the company’s Zacks Rank #3 (Hold).
What’s Deterring the Stock?
Foreign exchange movements are unfavorably impacting the company’s results. CONMED derives significant portion of revenues from international operations.
The strong U.S. dollar will continue to hinder sales growth as evident from the cautious guidance provided by management for full-year 2020. For 2020, the negative impact to sales from forex is now anticipated between 120 (basis points) bps and 150 bps.
What’s Favoring the Stock?
CONMED’s General Surgery segment’s sustained solid performance continues to bolster the top line. The company’s unique products and solutions within this segment provide it competitive edge in the MedTech space. Among unique products of General Surgery, the Anchor Tissue Retrieval bag deserves a mention.
Moreover, CONMED boasts a broad product portfolio that enables it to accelerate top-line growth over a considerable period. Additionally, product innovations will not only fortify product portfolio but also enhance overall performance.
Further, the company’s continued focus on Research and Development (R&D) helps in instilling investor confidence. Looking forward, CONMED’s management confirmed that it will continue to increase investments in R&D, which is likely to be 4.5-5% of net sales in 2020.
The company is reaping benefits from the improving trend of utilizing minimally invasive techniques as significant percentage of its products were created for these procedures.
In fact, a research report by Allied Market Research suggests that the global minimally invasive surgical instruments market is estimated to reach $52.98 billion by 2023 at a CAGR of 8.7% from 2017 to 2023. We believe solid market trends like these would fortify CONMED’s foothold in the niche space.
Which Way are Estimates Headed?
For 2020, the Zacks Consensus Estimate for revenues is pegged at $1.02 billion, indicating an improvement of 6.4% from the year-ago period. The same for earnings stands at $3.10, suggesting growth of 17.4% from the year-ago reported figure.
Stocks to Consider
Some better-ranked stocks from the broader medical space include Accuray Incorporated ARAY, West Pharmaceutical Services, Inc. WST and The Cooper Companies, Inc. COO, each currently carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Accuray has an expected earnings growth rate of 200% for third-quarter fiscal 2020.
West Pharmaceutical has an estimated earnings growth rate of 3.4% for first-quarter 2020.
Cooper Companies has a projected long-term earnings growth rate of 10.8%.
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