CONMED (CNMD) Beats On Q1 Earnings, Lifts FY18 Guidance

CONMED Corporation (NASDAQ:CNMD) reported first-quarter 2018 adjusted earnings per share of 53 cents, beating the Zacks Consensus Estimate by 23.3%. Adjusted earnings also improved 39.5% year over year.

Revenues came in at $202.1 million, outpacing the Zacks Consensus Estimate by 2.6%. Revenues increased 8.3% year over year as reported and 6.8% at constant currency (cc).

CONMED’s domestic revenues in the reported quarter, which represents 52.6% of total revenues, rose 6.9% on a year-over-year basis, courtesy of growth in both General Surgery and Orthopedics. Internationally, revenues increased 10% as reported and 4.7% at cc, representing 47.4% of total revenues.

Meanwhile, in the past three months, CONMED has rallied 10.2%, outperforming the industry’s decline of 11.4%.

Segment Details

Orthopedic Surgery

Orthopedic surgery accounted for 53.9% of the company’s revenues in the quarter. The segment registered revenues worth $108.9 million, up 4.9% on a year-over-year basis, driven by robust growth in capital sales.

Domestically, Orthopedics revenues recorded growth in two consecutive quarters after a long time. Internationally, Orthopedics revenues increased 1.6% year over year, marking the eighth consecutive quarter of growth.

General Surgery

This segment contributed 46% to the quarter’s total revenues. For the quarter under review, the segment’s revenues came in at $93.2 million, up 12.6% year over year.

Per management, growth can be attributed to strong performances across the product portfolio. Furthermore, domestically, first-quarter General Surgery sales increased to 12.8%, and internationally, General Surgery sales rose 12.1%.

Margins

Adjusted gross margin increased 50 basis points (bps) year over year to 54.2% of revenues. Gross profit rose 9.7% on a year-over-year basis.

Adjusted EBITDA margin in the first quarter was 17.1%, compared with 16.4% in the year-ago quarter. EBITDA grew 13.9% on a year-over-year basis.

Financial Condition

The company’s cash balance at the end of the first quarter was $21.1 million, compared with $32.6 million in the prior-year quarter.

Cash flow from operations was $25 million in the first quarter of 2018 compared with $15.3 million in the prior-year quarter.

Long-term debt at the end of the quarter was $442.4 million, down 6.2% sequentially.

View Raised

Encouraged by the solid first-quarter performance, CONMED raised its financial guidance.

The company now expects full-year 2018 constant-currency sales growth in the range of 4.5% to 5.5%, higher than the previous range of 4.0% to 5.0%. Notably, the Zacks Consensus Estimate for 2018 revenues is pegged at $831.2 million.

Adjusted net earnings per share are expected within $2.15-2.20, compared to the earlier $2.11-2.17. This shows 14% to 16% growth over 2017. Notably, the Zacks Consensus Estimate of $2.14 is below the guidance.

Additionally, management expects full-year gross margin to improve 50 to 100 bps, primarily driven by the company’s cost-saving initiatives.

Full-year R&D expenses are expected in the range of 4.5-5% as a percentage of total revenues.

Our Take

CONMED exited the first quarter of 2018 on strong top-line growth and margin expansion. Domestic and international revenues witnessed solid year-over-year growth across the company’s core segments. Orthopedic revenues outside the United States surged for the eighth consecutive quarter, which deserves a special mention. Long-term debt at the end of the quarter was also high, raising concerns.

Zacks Rank & Key Picks

CONMED carries a Zacks Rank #4 (Sell).

A few better-ranked stocks in the broader medical space, which reported solid earnings this season, are Laboratory Corporation of America Holdings (NYSE:LH) , Chemed Corp. (NYSE:CHE) and Intuitive Surgical, Inc. (NASDAQ:ISRG) . While Intuitive Surgical sports a Zacks Rank #1 (Strong Buy), LabCorp and Chemed carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

LabCorp reported first-quarter 2018 adjusted earnings per share of $2.78, beating the Zacks Consensus Estimate by 5.3%. Revenues came in at $2.85 billion, exceeding the Zacks Consensus Estimate of $2.78 billion.

Chemed posted first-quarter 2018 adjusted earnings per share of $2.72, surpassing the Zacks Consensus Estimate of $2.37. Revenues came in at $439.2 million, beating the Zacks Consensus Estimate of $420 million.

Intuitive Surgical reported first-quarter 2018 adjusted earnings of $2.44 per share, which beat the Zacks Consensus Estimate by 22.6%. Revenues totaled $848 million, also surpassing the Zacks Consensus Estimate by 10.6%.

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