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Leading medical devices maker C.R. Bard ((BCR - Analyst Report) is scheduled to report its second quarter fiscal 2012 results after the closing bell on Wednesday, July 18. The New Jersey-based company envisions that its sales for the second quarter would grow 4%-7% in constant currency. Moreover, it expects adjusted earnings in the band of $1.61 and $1.65 a share for the quarter.

The current Zacks Consensus Estimates for revenues and earnings for the second quarter are $756 million and $1.64 a share, respectively.

First Quarter Flashback

C.R. Bard’s first quarter 2012 adjusted earnings per share of $1.61 beat the Zacks Consensus Estimate of $1.57. Profit (as reported) rose 5% year-over-year to $138.7 million (or $1.60 a share).

Revenues increased 4% (up 5% in constant currency) year-over-year to $730 million, but fell short of the Zacks Consensus Estimate of $733 million. Year-over-year growth was triggered by the company’s Vascular and Oncology business leading from the front, backed by higher overseas revenues.

On a geographic basis, the U.S. market remained almost stagnant with just a 2% increase in sales. International revenues spiked 10% (up 11% in constant currency), boosted by the emerging markets.

Revenues from the core Vascular segment climbed 5% (up 6% in constant currency), benefiting from the contributions of the SenoRx acquisition. Oncology sales rose 7% (in terms of both reported and constant currency) while Urology sales edged up 3% (in terms of both reported and constant currency). Surgical Specialties division sales were flat year-over-year.

Estimate Revisions Trend

Agreement

Estimates for the second quarter elicited somewhat negative trend over the past week and month. Out of the 15 analysts covering the stock, one has made a negative revision over the last 7 days with no instance of upward revision. Over the last 30 days, there have been two downward revisions with no movement in the positive direction.

No movement has been observed in either direction for fiscal 2012 over the past week. However, estimate revision trend remained mixed over the past 30 days; where only one analyst (out of 16) has raised an individual forecast for the fiscal coupled with another moving in the reverse direction.

Sustained poor growth across Bard’s core segments is a cause of concern for the analysts. A lackluster pricing environment for the company’s offerings and a soft hospital equipment purchase backdrop in the domestic market continue to remain as overhangs. Also worth mentioning in this context is the dilutive acquisition of Lutonix.

Magnitude

Estimates for the second quarter have been static at the current level of $1.64 over the past week and month. For fiscal 2012, estimates also remained flat at $6.68 per share over the past 7 as well as 30 days, representing an estimated year over year growth of 4.38%.  

With respect to earnings surprises, C.R. Bard has posted three positive surprises in the preceding four quarters while it met the Zacks Consensus Estimate on the other occasion. The company has delivered an average positive earnings surprise of 1.66% over the past four quarters, implying that it has beaten the Zacks Consensus Estimate by that measure.

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 resources depth and product leadership are its major competitive advantages. Most of the company’s products are ranked either first or second in terms of market share.

C.R. Bard is also making prudent use of cash in the form of acquisitions and share repurchases. This strategy positions Bard in a positive light amid tough macroeconomic conditions. Moreover the company’s credentials in raising dividends even appeals to risk-averse investors.

C.R. Bard’s incremental R&D investment should boost its pipeline and give way to product innovation/differentiation. Several new product launches are expected to support growth moving forward and to help the company achieve its sales target.

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).

Moreover, a soft U.S. market may weigh on the company’s second quarter results. We currently have a Neutral recommendation on C.R. Bard. The stock currently retains a Zacks #3 Rank, which translates into a short-term Hold rating.

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