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On Jun 4, we retained our Neutral recommendation on CR Bard Inc. (BCR - Analyst Report) following its moderate first-quarter results. Despite a potential material upside from the Gore litigation, the company’s organic growth rate, especially in the U.S., along with declining profits remain areas of concern.

Why the Retention?

On Apr 23, Bard posted first-quarter 2013 adjusted earnings per share of $1.44, which met the Zacks Consensus Estimate. Although adjusted earnings declined 11% year over year, it was within the company’s previously announced guidance.

Revenues inched up 1% both in terms of reported and constant currency on a year-over-year basis to $740.3 million. Revenues surpassed the Zacks Consensus Estimate of $738 million.

Bard’s earnings have also managed to beat the Zacks Consensus Estimate in three out of the last four quarters with an average surprise of 0.40%. Over the past 60 days, the Zacks Consensus Estimate has moved down by 1.7% to $6.25 for 2013 but increased by 0.8% to $7.67 for 2014.

Potential benefit from the Gore litigation, acquisitions, expansion into the emerging markets and new products should enable the company to drive long-term growth. International sales are being boosted by solid growth in emerging markets. Further, its recent investment strategies to increase profitability should pay off in the future.

However, the company lacks short-term catalysts. The challenging Med-tech environment, which is affecting Bard’s organic growth, might continue to do so going forward. Moreover, government-mandated healthcare reforms in the U.S. have led to a less flexible pricing environment and may pressurize prices across the board. Apart from these, the company continues to face procedure volume headwind in the domestic market.

Other Stocks to Consider

CR Bard has a Zacks Rank #3 (Hold). While we remain on the sidelines regarding Bard, other medical stocks that warrant a look include CONMED (CNMD - Analyst Report), Becton, Dickinson and Company (BDX - Analyst Report) and West Pharmaceutical Services (WST - Snapshot Report). All these stocks carry a Zacks Rank #2 (Buy).

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