CONMED's Buffalo Filter Buyout Likely To Be Accretive In 2020

CONMED Corporation (NASDAQ:CNMD) recently announced a definitive agreement to acquire Buffalo Filter LLC for $365 million on a cash-free and debt-free basis. The buyout, expected to close in the first quarter of 2019, is likely to boost CONMED’s General Surgery segment, besides strengthening its surgical smoke evacuation portfolio.

For investors’ notice, New York-based Buffalo Filter is a globally recognized brand in surgical safety. The company’s surgical smoke evacuation portfolio includes smoke evacuation pencils, smoke evacuators and laparoscopic solutions.

Hence, the acquisition is likely to fortify CONMED’s foothold in the surgical smoke evacuation market.

Rationale Behind the Deal

Additionally, management at CONMED expects the acquisition to be neutral to the company’s adjusted earnings per share in 2019 and to be accretive by 10-15 cents in 2020.

Moreover, the buyout is expected to boost CONMED's organic revenues growth by 50 basis points (bps) over the long haul. Post 2019, the acquisition is expected to be accretive to the company’s gross margins.

Furthermore, adjusted operating margins are expected to improve 100 bps in the first year and an additional 100 bps by the third year.

Promising Surgical Smoke Evacuation Portfolio

CONMED’s ClearView Smoke Evacuation Unit, GoldVac and GoldVac Slim Smoke Evacuation Pencils are currently much in demand.

A research by MarketsandMarkets reveals that the global smoke evacuation system market is expected to reach $180 Million by 2020, at a CAGR of 5.6%. The rising demand for minimally invasive surgeries and a growing grey population are driving growth in the market.

Hence, the latest move has been a well-timed one for CONMED.

Another key player in the space is Stryker Corporation (NYSE:SYK) whose coveted Neptune E-SEP Smoke Evacuation Pencil provides a two-in-one solution for electrosurgery and smoke evacuation. Earlier in 2018, the company also acquired SafeAir AG, a Swiss medical device company with a view to reduce health risks related to surgical smoke.

Price Performance

Over the past year, shares of CONMED have rallied 34.8%, against the industry’s 2.3% decline. The current level also compares favorably with the S&P 500 index’s decline of 0.5%.

Zacks Rank & Key Picks

CONMED currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader medical space are, Integer Holdings Corporation (NYSE:ITGR) and OPKO Health, Inc. (NASDAQ:OPK) .

Integer Holdings has an earnings growth rate of 31.2% for the next quarter and a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

OPKO Health’s long-term earnings growth rate is projected at 12%. The stock carries a Zacks Rank of 2 (Buy).

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