Mentor Corporation

Mentor Corporation (MNT) exceeded analysts’ earnings expectations in 10 out of the past 11 quarters. After reporting impressive second-quarter results, MNT upped its full-year outlook. Earnings per share are projected to grow 21% over the next 3-5 years. In mid June the Board of Directors raised its quarterly dividend by 11% to 20 cents per share. MNT is currently yielding 1.8%

Full Analysis

Mentor engages in the development, manufacture and marketing of various products serving the aesthetic medicine market. The company’s products comprise breast implants; capital equipment and consumables used for soft tissue aspiration or body contouring; breast reconstruction products; extremity tissue expanders; and facial rejuvenation products, which consist of dermal filler products and cosmeceutical products for skin restoration.

On Aug 6, MNT posted first-quarter fiscal 2008 profits of 48 cents per share. The result beat the Street’s estimate of 34 cents by 41.2% and marked a 45.5% year-over-year improvement for the company. MNT has now topped the consensus earnings estimate in six straight quarters and in 10 out of the past 11. Total net sales came in at $95.6 million, compared to $79.4 million a year ago. The company stated that the strong results were primarily the result of strong sales of MemoryGel silicone breast implants in the U.S. augmentation market as it transitions from saline-filled breast implants to MemoryGel silicone breast implants.

President and CEO Joshua H. Levine stated, "We are very pleased with our financial results for the first quarter and the notable progress within our R&D pipeline. From a strategic standpoint, the acquisition of Perouse Plastie at the end of the quarter expands the company's international product offerings and positions Mentor for future growth and expansion in key international markets." On Jul 3, MNT completed its acquisition of Perouse Plastie, a rapidly growing manufacturer and distributor of silicone gel breast implants based in Bornel, France.

In addition to reporting impressive second-quarter results, MNT upped its full-year outlook and now projects revenues between $370 million and $385 million and earnings per share from continuing operations between $1.40 and $1.45.

Analysts responded to the company’s improved outlook by adjusting their profit forecasts. The consensus earnings estimate for this year currently sits at $1.42 and marks a 17-cent increase over the past 60 days. Estimates for next year have risen 18 cents to $1.81 over the same period of time. Earnings per share are projected to grow 21% over the next 3-5 years, with the industry expected to grow at a 15% clip.

During the quarter, MNT bought back 5.2 million shares of its common stock at an average price of $40.70 per share. Moreover, in mid June the Board of Directors raised its quarterly dividend by 11% to 20 cents per share. The company is currently yielding 1.8% and has a five-year average dividend yield of 1.5%. Its return on equity, a common measure of profitability, betters that of the industry average—18% compared to 11%.

MNT is a Zacks #2 Rank (Buy) stock. Zacks #2 Rank stocks have generated an average annual return of 21.7% since 1988. Because the Zacks Rank has a market cap bias, Growth & Income investors may find a greater number of large-cap stocks by considering both Zacks #1 Rank (Strong Buy) and Zacks #2 Rank (Buy) stocks in their selection criteria.