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Wright Medical Hits New 52-Week High

Zacks Equity Research

Shares of global orthopaedic device company Wright Medical Group, Inc. (WMGI) reached new 52-week high of $30.87 in mid-day trading on Dec 31. Shares of the company closed at $30.71 on the same day, representing a strong one-year return of 46.3%.

WMGI has a market cap of $1.45 billion. Average volume of shares traded over the last three months stood at approximately 424.9K.

Shares of Wright Medical Group started rising following completion of acquisition of French orthopedic extremities company Biotech International on Nov 15. The acquisition will add Biotech’s extremity product portfolio that will boost WMGI’s global Extremities business growth.

The acquisition was initially announced on Oct 16, 2013 and involved an upfront payment of roughly $75 million in cash and stock. It also includes additional payments of up to $5 million in cash, payable upon attaining certain revenue milestones in 2014 and 2015.

However, Wright Medical failed to impress investors in its third quarter results. The company posted a broader 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, earnings 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 revenues 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 quarterly results, WMGI narrowed its revenue guidance for 2013 to $237–$240 million from $235–$240 million, which has incorporated short-term dis-synergies due to the previously announced 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.

Due to the acquisition of Biotech, WMGI now expects full year revenues towards the high-end of the guided range. However, the company kept its adjusted earnings per share guidance unchanged.

Currently, Wright Medical retains a Zacks Rank #4 (Sell). Some better-ranked stocks in the medical product industry include Advaxis, Inc. (ADXS), diaDexus, Inc. (DDXS), and Hill-Rom Holdings, Inc. (HRC). All of them carry a Zacks Rank #2 (Buy).

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