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Symmetry Medical’s (SMA - Analyst Report) second-quarter fiscal 2011 adjusted earnings per share of 16 cents beat the Zacks Consensus Estimate by a couple of cents and exceeded the year-ago adjusted earnings of 13 cents.

Adjusted earnings exclude facility consolidation expenses, employee severance payments and management transition costs. Profit (as reported) dipped 6.8% year over year to $4.2 million (or 12 cents a share), hurt by roughly $1.7 million in facility closure and severance charges.

Revenues

Revenues rose 6.6% year over year to $94.7 million, but missed the Zacks Consensus Estimate of $96 million. The growth was driven by higher customer shipments across the company’s instruments and surgical cases businesses.

By product line, sales from surgical instruments jumped 7% year over year to $37.8 million. Implants sales, however, fell 7% to $26.5 million. Cases sales surged 25% to $24.8 million while other revenues climbed 10% to $5.6 million.

Margins

Gross margin improved to 23.5% from 22.9% year-ago on higher revenues. Operating margin declined to 7.9% from 8.7% a year ago, impacted by hefty charges.

Balance Sheet

Symmetry exited the second quarter with cash and cash equivalents of roughly $16.4 million, up 67% year over year. Total long-term debt declined 2% year over year to $83.9 million.

Guidance Trimmed

Symmetry has chopped its guidance for fiscal 2011 based on its first half results, prevailing market trends and its recently announced acquisition of privately-held electrosurgical instruments maker Olsen Medical. The Indiana-based company has lowered its revenue forecast to a range of $354 million to $370 million from its earlier expectation of $363 million to $383 million.

Adjusted earnings per share target have been reduced to a band of 43 cents-57 cents from 57 cents-65 cents. On a reported basis, earnings per share are now expected in the range of 32 cents to 46 cents compared with the prior view of 50 cents to 58 cents. The current  Zacks Consensus Estimates for revenues and earnings per share for 2011 are $373 million and 57 cents, respectively.

Symmetry expects the Olsen Medical deal to complete by August 15, 2011, and envisions the acquisition to be neutral to its fiscal 2011 results (excluding acquisition-related charges) and accretive to 2012 results.

Symmetry is the largest OEM provider of implants and related surgical instruments and cases to orthopedic devices manufacturers. Its major customers include Johnson & Johnson’s (JNJ - Analyst Report) DePuy, Stryker (SYK - Analyst Report) and Zimmer Holdings (ZMH - Analyst Report). The company has created a distinct competitive niche in the orthopedic devices market with its “Total Solutions Approach”.

Symmetry is investing in revamping its management structure and enhancing customer collaboration, which should push growth moving forward. The company should benefit from higher demand for its solutions as its major customers ramp up spending and accelerate product launches. However, the company’s high spending may continue to weigh on its bottom line. Currently, we have a Neutral recommendation on the stock.

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