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Wright Medical (WMGI) Poised on Acquisitions Amid Forex Woes

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On Mar 19, we issued an updated research report on Wright Medical Group N.V. WMGI. Wright Medical carries a Zacks Rank #3 (Hold). The company is focusing on strategic acquisitions and divestitures. However, foreign currency fluctuation remains a woe.

The company recently completed the acquisition of IMASCAP SAS, a leader in the development of software-based solutions for preoperative planning of shoulder replacement surgery. Management is also quite optimistic about its recent acquisition of BLUEPRINT. Also, Wright Medical’s decision to sell off its OrthoRecon unit to MicroPort Medical B.V., a subsidiary of MicroPort Scientific Corp, bodes well for the company. 

The company recently reported fourth-quarter results, wherein adjusted earnings and revenues surpassed the respective Zacks Consensus Estimate. The company witnessed growth in all business segments. Also, the expansion in gross margin buoys optimism.

 

 

Wright Medical is focusing on product innovation through research and development. The company recently launched INVISION Total Ankle Revision System — the first system developed for total ankle revision arthroplasty.

Wright Medical derives significant part of its total revenues from international operations, which is being adversely affected by fluctuations in foreign currency exchange rates. A strong U.S. dollar is denting the company’s international revenues and subsequently putting pressure on its gross margin.

Also, a lackluster international performance of the lower extremities segment is raising concerns. Also, pricing pressure continues to trouble Wright Medical. Increased costs related to product launch and re-building infrastructure are expected to put pressure on margins. Problems associated with distributors are major headwinds.

In the past six months, Wright Medical has underperformed the industry. The company’s shares have lost 19.9% as against the industry’s rally of almost 10.8%.

Key Picks

A few better-ranked stocks in the broader medical sector are Bio-Rad Laboratories BIO, athenahealth, Inc. ATHN and Varian Medical Systems, Inc. VAR.

Bio-Rad Laboratories sports a Zacks Rank of 1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.The company has a long-term expected earnings growth rate of 20%.

athenahealth is another Zacks #1 Ranked player. The company has a long-term expected earnings growth rate of 21.5%.

Varian Medical has a long-term expected earnings growth rate of 8%. The stock carries a Zacks Rank #2 (Buy).

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