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Leading medical devices maker C.R. Bard (BCR - Analyst Report) beat the Zacks Consensus Estimates in fourth-quarter 2011 but its profits were dragged down by hefty charges. The company’s adjusted earnings per share of $1.70 beat the Zacks Consensus Estimate of $1.68. Profit (as reported) slid 16% year over year to $113.8 million (or $1.30 a share).

Highlights from the Quarter

Revenues for the quarter rose 5% year over year to $751.9 million, comfortably beating the Zacks Consensus Estimate of $748 million. Sales were fueled by growth across the board with the company’s Vascular and Oncology businesses leading from the front.

C.R. Bard’s core Vascular division posted strongest growth in the fourth quarter with sales surging 8% year over year, benefiting from strong growth in overseas markets.

Oncology sales climbed 6% while Urology sales crept up 3%. Surgical Specialties division registered a growth of 2%. Pricing pressure and amortization led to a decline in gross margin in the quarter.

We have discussed the quarterly results at length here: Bard Tops in 4Q, Charges Crimp Net

Agreement – Estimate Revisions

Estimate for fiscal 2012 has been clearly inclined towards the positive side over the past month with 10 (out of total 19) analysts having raised their forecasts along with 3 reverse movements. There was a single positive revision over the past week with no downward movement.

Estimate for the first quarter is tilted towards the negative side with 6 (out of 16) analysts having lowered their forecasts over the past month while 5 making positive revisions. There were absolutely no movements in the estimate for the quarter over the past week.

Magnitude – Consensus Estimate Trend

Given the strong directional pressure, there has been an increase of 2 cents in the estimate for fiscal 2012 over the last 30 days. However, the estimate for the fiscal remained static (at $6.66) over the past week. For the first quarter, estimate remained stationary (at $1.56) over the past 7 and 30 days.

Our View

C.R. Bard’s well-diversified end-markets and vast product portfolio insulate it from fluctuations in any single therapeutic category. The company’s resource depth and focused innovation are its major competitive advantages. C.R. Bard’s incremental R&D investment should boost its pipeline and give way to product innovation/differentiation. Overall, the company launched 51 new products in 2011.

C.R. Bard has embarked on a four-point growth strategy. Its strategy includes sales force expansion, complementary product acquisitions, increased internal product development and cost control. The company continues to successfully execute this strategy with sustained R&D investment producing new high-margin products, enhanced by key acquisitions and divestitures.

In this regard, we view that the acquisition of Medivance bodes well with C.R. Bard’s business model and will boost its offerings in the critical care settings. Moreover, the company bought medical devices maker ClearStream Technologies last year. More recently, C.R. Bard scooped up Lutonix Inc., which has enabled it to expand into the large and lucrative market for drug-coated balloons. The company expects Medivance and ClearStream deals to be accretive to its earnings in 2012.

We expect new product flow and sales force consolidation to drive organic revenues growth and help C.R. Bard to meet its sales objective. The new Ventralex ST umbilical hernia repair product, Ventrio ST ventral hernia repair system and the Echo PS mesh positioning system should support growth moving ahead.

However, heightened competition and pricing/procedure volume pressure remain areas of concern. C.R. Bard faces a mix of competitors ranging from large manufacturers with multiple business lines like Boston Scientific (BSX - Analyst Report) and Johnson & Johnson (JNJ - Analyst Report) to smaller manufacturers that offer a limited selection of products like Angiodynamics (ANGO - Analyst Report).

Competition has increased across several businesses, especially in soft tissue repair. AngioDynamics’ recently announced acquisition of Massachusetts-based privately-held Navilyst Medical may trigger heightened competition in the vascular space and increased pricing pressure. The acquisition is expected to double AngioDynamics’ share of the vascular access market.

We also account for the sluggish U.S. market conditions and the company’s aggressive acquisition strategy which has inherent integration risk. We currently have a Neutral rating on C.R. Bard. The stock  retains a Zacks #4 Rank, which translates into a short-term “Sell” recommendation.

About Earnings Estimate Scorecard

Len Zacks, PhD in mathematics from MIT, proved over 30 years ago that earnings estimate revisions are the most powerful force impacting stock prices. He turned this ground breaking discovery into two of the most celebrating stock rating systems in use today. The Zacks Rank for stock trading in a 1 to 3 month time horizon and the Zacks Recommendation for long-term investing (6+ months). These “Earnings Estimate Scorecard” articles help analyze the important aspects of estimate revisions for each stock after their quarterly earnings announcements. Learn more about earnings estimates and our proven stock ratings at http://www.zacks.com/education/.

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