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On Aug 14, Zacks Investment Research upgraded Greatbatch Inc. (GB - Analyst Report) to a Zacks Rank #1 (Strong Buy).

Why the Upgrade?

Greatbatch has been witnessing rising estimates on the back of strong second-quarter results and higher guidance for 2013. The company delivered positive earnings surprises in the last 4 quarters with an average beat of 7.39%. The long-term expected earnings growth rate for this stock is 8.5%.

Greatbatch reported second-quarter adjusted earnings per share (excluding one-time expenses) of 56 cents, which comfortably beat the Zacks Consensus Estimate by 8 cents. The result exceeded the year-ago adjusted earnings by an impressive 30.2%, driven by solid organic revenue growth, improved gross margins and controlled operating expenses along with benefits from effective tax rate.

The company is gaining significantly from its strategic realignment initiative to achieve 5% organic growth and transform into a producer of complete medical devices for Original Equipment Manufacturer (OEM) customers from being a supplier of batteries, capacitors, and components used in implantable medical devices (IMDs).

Moreover, GB’s pipeline is healthy with a number of products currently in development that are expected to support growth in the long run. The company has forged strategic long-term agreements with its OEM clients to secure healthy revenue growth. Its top customers include leading players such as Medtronic (MDT - Analyst Report) and St. Jude Medical (STJ - Analyst Report).

Based on its progress, GB raised its adjusted earnings per share guidance to the range of $2.05–$2.15 from $1.90–$2.00 for 2013. However, Greatbatch reiterated its revenue outlook for 2013 toward the lower end of $660 million–$680 million due to the disposition of non-core orthopedic assets worth $15 million. On an organic basis, total sales are expected to be up by 5%–8%.

The Zacks Consensus Estimate for 2013 increased 2.5% to $2.09 per share over the last 30 days. The Zacks Consensus Estimate for 2014 also increased 1.8% to $2.26 in the same period.   

Other Stocks to Consider

Other semi-discretes stocks that warrant a look include Cree (CREE - Snapshot Report). It has a Zacks Rank #2 (Buy).
 

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