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We have reiterated our Neutral rating on CR Bard Inc. (BCR - Analyst Report) following its second quarter results, where adjusted earnings of $1.62 per share trailed the Zacks Consensus Estimate of $1.64.

Profit was $133.9 million (or $1.54 a share) versus a net loss of $47.8 million (or loss of 55 cents) in the year-ago quarter. Moderate revenue growth and lower expenses contributed to higher net income.

Revenues increased 2% (up 4% in constant currency) year over year to $742.6 million, but fell short of the Zacks Consensus Estimate of $755 million. The year-over-year improvement was driven by balanced growth across the company’s Vascular, Urology and Oncology segments.

C.R. Bard is well-diversified, providing a complete line of products to treat medical conditions through less invasive procedures in a cost-effective manner. The company aims to achieve long-term growth by focusing on business development, internal Research and Development (R&D) and strategic investment in higher growth markets.

C.R. Bard keeps introducing new products in the market at regular intervals. The company also has a reasonably strong pipeline along with a substantial number of projects in each of its business segments. It believes that the Sherlock 3CG, Sapiens TCS, 5.4 French Triple Lumen PowerPICC, the Site-Rite Prevue and the Powerglide will contribute significantly to growth.

During the second quarter, Bard introduced its latest family of intermediate-sized low artifact PowerPorts and the PowerPICC FT series. In May, the company received the 510(k) approval for its Site-Rite Prevue Ultrasound System and Pinpoint Gel Cap and Needle Guide. It has released this technology combination in the market. The company introduced the Lutonix drug-coated balloon in Europe in the month of July.

Furthermore, C.R. Bard remains committed to delivering incremental returns to investors by leveraging its solid balance sheet, healthy free cash flow and earnings power. The company’s share buyback program coupled with a hike in dividends are deemed to be the best strategic moves adopted to attract investors. This strategy also positions Bard in a positive light amidst the tough macroeconomic conditions.

However, difficult austerity measures in Europe and utilization pressure are affecting C.R. Bard’s double-digit top-line growth. While positive returns from the company’s businesses in emerging markets are keeping the company within its guidance, currency headwinds are affecting the company’s gross margins adversely.
 
A lackluster pricing environment for the devices offered by the company can be accredited to tough competition and a weak hospital equipment purchase environment.  Government-mandated healthcare reforms in the U.S. have led to a less flexible pricing environment and may pressure prices across the board. Moreover, the company continues to face procedure volume headwinds in the domestic market.

Increasing competition from strong players like Boston Scientific (BSX - Analyst Report), Johnson & Johnson (JNJ - Analyst Report) and Angiodynamics (ANGO - Analyst Report) also remains a matter of concern. The stent business is facing competition in superficial femoral arteries (SFA) in the domestic market. Our Neutral recommendation on the stock carries a short-term Zacks #3 Rank (Hold).

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