CONMED (CNMD) Earnings & Sales Beat In Q2, '16 View Up

CONMED Corporation (NASDAQ:CNMD) reported second-quarter 2016 adjusted earnings of 47 cents per share, surpassing the Zacks Consensus Estimate of 45 cents. Further, earnings improved 9.3% on a year-over-year basis.

The upside was driven by a 6.9% increase in sales to around $193.4 million, which was also ahead of the Zacks Consensus Estimate of $192 million. However, on a constant currency (cc) basis, sales improved 9.2%.

Quarter Details

In terms of product category, CONMED generated sales of almost $154.2 million and $39.2 million from Single-use and Capital products, respectively. Single-use products sales increased 6.1% (up 8.4% at cc), while capital products sales rose 10.1% (up 12.5% at cc) on a year-over-year basis.

In terms of product lines, Orthopaedic surgery sales decreased 1.3% at cc to $92.7 million. U.S. sales decreased 5.1%, however, international sales were up 1.1% at cc.

Sales from General Surgery (SG&A) surged almost 23.1% (up 24.5% at cc) to $87.6 million. U.S. sales increased 26.5%, while international sales were up 21% at cc in the quarter. On the other hand, the Surgical Visualization unit recorded sales of $13.1 million, up 2.6% from the year-ago quarter, at cc.

Domestic sales, which accounted for 51% of total revenue, increased 10.9% owing to robust growth in the General Surgery unit. However, the Visualization and Orthopaedic section did not contribute significantly toward sales.

CONMED CORP Price, Consensus and EPS Surprise

CONMED CORP Price, Consensus and EPS Surprise | CONMED CORP Quote

Worldwide Visualization sales increased 2.6% while U.S. sales decreased 5.7%. Meanwhile international sales, accounting for 49% of total sales, inched up 2.9% from the prior-year quarter.

Notably, SurgiQuest's AirSeal system sales drove a 26.5% year-over-year upside in the General Surgery business. Total sales of AirSeal systems were $18.5 million worldwide, representing 36% growth from the year-ago quarter on an adjusted basis. However, volatility in foreign exchange rates had an impact of $4.3 million on sales in the second quarter.

Margin Details

Adjusted gross margin in the second quarter, excluding restructuring costs, expanded 290 basis points (bps) year over year to 55.4% from 52.5% recorded in the same quarter last year. This is primarily attributable to improvement in production costs, partially offset by unfavorable pricing mix and foreign exchange volatility.

Adjusted EBITDA margin in the second quarter of 2016 was 17.7% compared with 15.9% in 2015. The unfavorable foreign exchange impact marred EBITDA margin in second-quarter 2016 as well.

Selling and administrative expenses increased 13.3% to $80.7 million, while research and development expenses surged 6.8% to $8 million from the year ago quarter.

Guidance

CONMED estimates sales in the range of $757 million to $767 million, up from the earlier range of $768--$778 million for full-year 2016. The guidance reflects tepid organic sales growth of -1% to 1% at cc, due to unsatisfactory organic performance in the quarter.

CONMED also estimates a $17 million to $19 million impact of foreign exchange on sales for the year, higher than the previous range of $13 million to $15 million.

Sales from the SurgiQuest acquisition is expected in the band of $62 million to $67 million, compared to the previous range of $55 million to $60 million.

Management maintains adjusted gross margin projection, excluding restructuring costs, at the range of 54.5% to 55.5% for the full year.

CONMED forecasts quarterly adjusted SG&A expenses in the range of 38% to 40.5% of sales. For the full year, the company estimates SG&A expenses in the band of 38.5% to 39.5% of sales. R&D expenses are forecasted in the range of $34 million to $36 million as compared to the previous range of $36 million to $38 million.

Adjusted earnings are now projected in the band of $1.83 to $1.93 per share as compared to the earlier guidance of $1.95 to $2.05.

Zacks Rank & Key Picks

Currently, CONMED carries a Zacks Rank #3 (Hold).

Better-ranked stocks in the industry include Align Technology (NASDAQ:ALGN) , AmerisourceBergen Corporation (NYSE:ABC) and CR Bard Inc (NYSE:BCR) . Align Technology sports a Zacks Rank #1 (Strong Buy) while AmerisourceBergen and CR Bard carry a Zacks Rank #2 (Buy).