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Teleflex Completes Vidacare Acquisition

Zacks Equity Research

Teleflex Incorporated (TFX) revealed that it has completed acquisition of privately-held Vidacare Corporation, based in San Antonio, Texas. Vidacare is a leading provider of intraosseous (IO), or inside the bone access devices. However, the announcement failed to impress investors, may be due to the lack of any material impact of the acquisition on the 2013 earnings. Shares fell 0.4% to $97.09 yesterday.

Vidacare’s products include EZ-IO Intraosseous Vascular Access System, the OnControl Bone Marrow System, and the OnControl Bone Access System. They are used in a wide array of applications such as vascular access, emergency medicine, oncology and spinal surgery.

Teleflex financed the transaction using borrowings under its revolving credit facility. The transaction is valued at $262.5 million. However, according to Vidacare, total proceeds to be distributed to Vidacare shareholders and vested option holders are expected to be $285 million.

The acquisition is not expected to considerably impact Teleflex’s 2013 revenues and adjusted earnings per share. However, it is expected to contribute roughly $68–$72 million in revenues and 10–15 cents in adjusted earnings per share in fiscal year 2014, excluding non-recurring purchase accounting items and other acquisition and integration related costs.

Teleflex, a Zacks Rank #3 (Hold) stock, posted a 26.7% rise in adjusted earnings to $1.33 per share for the third quarter of 2013 from $1.05 in the same quarter of 2012. With this, earnings significantly beat the Zacks Consensus Estimate of $1.14. Net earnings surged 29.3% to $55.6 million from $43.0 million in the year-ago quarter.  

Net revenues went up 12.4% to $413.8 million, exceeding the Zacks Consensus Estimate of $410 million. Excluding foreign exchange fluctuations, net revenues rose 11.6% from the prior-year quarter.

The increase in revenues was attributable to continued strength in Critical Care, owing to the contribution from the acquisition of LMA International in October 2012, higher average selling price of products, and the non-stop introduction of new products.

For 2013, TFX anticipates constant currency revenue growth between 8.5% and 10%, down from the earlier guidance of 10% to 12%. The lower revenue guidance was driven by weaknesses with respect to sales of its OEM and respiratory therapy products.

Teleflex expects weaknesses in those product lines to continue in the fourth quarter as well. In the fourth quarter, TFX also expects lower revenue in Asia due to the timing of certain distributor negotiations which are progressing slower than initially planned.

However, Teleflex upgraded its adjusted earnings per share guidance due to its continued cost reduction efforts. The company expects adjusted earnings per share in the range of $4.85 to $5.00 compared with the prior outlook of $4.70–$4.90. The current Zacks Consensus Estimate of $4.94 lies within the guided range.

While TFX remain on the sidelines, some better-ranked stocks in the medical instruments industry include Cynosure, Inc. (CYNO), CryoLife, Inc. (CRY) and Natus Medical Inc. (BABY). All of them carry a Zacks Rank #1 (Strong Buy).

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Read the Full Research Report on CYNO

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