Greatbatch with Modest Upside

Greatbatch (GB - Analyst Report) reported Q1 top-line above expectations primarily due to acquisitions in the quarter. However, EPS was lower than expected on lower gross margin and higher operating and acquisition-related expenses, including increased intangibles amortization.

Our 2008 EPS estimates again decline on higher interest expense, acquisition dilution (including higher amortization) and overall higher SG&A and RD&E expenditures. If the company meets its operational efficiency goals, EPS growth may benefit in 2009 and beyond. Our target moves to $22.50.

While diversifying beyond a CRM original equipment manufacturer -- now less than 50% of Q108 sales -- the company is taking on integration risk as it moves into new arenas. We do see benefits to the diversification effort if management is successful at integrating acquisitions.

Read the full analyst report on GB.

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