Back to top

Analyst Blog

This page is temporarily not available.  Please check later as it should be available shortly. If you have any questions, please email customer support at support@zacks.com or call 800-767-3771 ext.  9339.

We reaffirm our Outperform rating on orthotic and prosthetic (O&P) company Hanger Orthopedic (HGR - Analyst Report as we remain upbeat about its business prospects. Earnings for first-quarter fiscal 2011 matched the Zacks Consensus Estimate while profit skyrocketed 55% year over year owing to the combined impact of higher revenues and management’s cost containment initiatives.

Healthy contributions from the company’s therapeutic solutions and distribution businesses coupled with the acquisition of rehabilitation technologies provider Accelerated Care Plus (“ACP”) fueled double-digit growth in the top line. However, sales missed the Zacks Consensus Estimate. Hanger’s patient care business was negatively impacted by inclement weather.

The company raised its earnings forecast for fiscal 2011 while maintaining its sales expectation for the year. Moreover, it remains optimistic about the growth prospects in its patient care business for the remainder of fiscal 2011.

Hanger leads in the O&P patient care services market, operating through more than 675 patient care centers across the U.S. The company is enjoying healthy demand for its services. Linkia (one of Hanger’s four business units), the first managed care organization dedicated solely to the O&P market, remains a significant growth engine for the company. Linkia continues to expand its relationship with national and regional insurance companies.

Hanger’s economies of scale are unmatched by its competitors which include notable players in the O&P space such as Orthofix International (OFIX - Snapshot Report), Conmed Corp. (CNMD - Analyst Report), Exactech Inc. (EXAC - Snapshot Report) and Owens & Minor Inc. (OMI - Snapshot Report).

To expand its geographic presence, Hanger is pursuing small tuck-in acquisitions. The company’s $155 million acquisition of ACP in December 2010 has added a fresh avenue of growth. Hanger anticipates the transaction to be accretive in 2011.

Hanger has substantially completed the relocation of its headquarters from Bethesda, Maryland, to Austin, Texas. The company is poised to achieve meaningful cost synergies from its corporate relocation. Another significant growth catalyst represents broader reimbursement coverage for its electrical stimulation device WalkAide. Moreover, Hanger is preparing to roll out a pediatric version of WalkAide.

However, Hanger’s back-to-back acquisitions could lead to substantial integration risk. Our recommendation on the stock is in consonance with the Zacks #2 Rank, which translates into a short-term Buy recommendation.

Please login to Zacks.com or register to post a comment.

New to Zacks?

Start Here

Zacks Investment Research

Close

Are you a new Zacks Member or a visitor to Zacks.com?

Top Zacks Features

Learn more

Start for as little as $4.50 per trade.

My Portfolio Tracker

Is it Time to Sell?

One of the most important steps you can take today is to set up your portfolio tracker on Zacks.com. Once you do, you'll be notified of major events affecting your stocks and/or funds with daily email alerts.

More Zacks Resources

Zacks Rank Home - Evaluate your stocks and use the Zacks Rank to eliminate the losers and keep the winners.

Mutual Fund Rank Home - Evaluate your funds with the Mutual Fund Rank for both your personal and retirement funds.

Stock/Mutual Fund Screening - Find better stocks and mutual funds. The ones most likely to beat the market and provide a positive return.

My Portfolio - Track your Portfolio and find out where your stocks/mutual funds stack up with the Zacks Rank.

Zacks #1 Rank Top Movers for Zacks #1 Rank Top Movers

Company Symbol Price %Chg
LAKE SHORE G LSG 0.77 +6.05%
QUESTCOR PHA QCOR 80.07 +2.47%
VIPSHOP HOLD VIPS 156.35 +1.82%
ENLINK MIDST ENLC 36.29 +1.60%
BNC BANCORP BNCN 17.33 +1.58%