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Medical technology company CareFusion (CFN - Analyst Report) recently announced an agreement for the acquisition of privately-owned Brazilian company, Intermed Equipamento Medico Hospitalar Ltda. Sao Paulo-based Intermed is a developer, manufacturer and supplier of medical equipment for use in respiratory care including ventilators and accessories for ventilation across Latin America.

The acquisition is expected to go through during CareFusion’s second quarter fiscal 2013, subject to customary conditions. However, the financial terms of the agreement remain undisclosed.

Though the acquisition will be slightly dilutive to CareFusion’s fiscal 2013 earnings, it is expected to have a neutral impact on earnings for fiscal 2014.

CareFusion is targeting a 12−14% compounded earnings per share growth through fiscal 2015 on the back of capital allocation in the form of suitable acquisitions and share buyback programs. The upcoming acquisition of Intermed is in line with the company’s strategy.

Brazil is one of the largest economies with a flourishing healthcare sector, backed by government investments, burgeoning middle class and higher formal employment. Thus, the acquisition is a worthy investment in a high-value market as it is expected to be accretive to CareFusion’s top-line by generating $25 million annually.

Going forward, CareFusion will accelerate its globalization strategy and leverage sales for its Respiratory Technologies business. The company reported 3% year over year revenue growth to gross $968 million in the fourth quarter of fiscal 2012. It recorded 29% sales growth in Respiratory Technologies in the quarter. CareFusion also witnessed notable growth in the BRIC nations in the most recent quarter.

Intermed is, thus a strategic fit in CareFusion’s existing respiratory product platform. The acquisition underlines the company’s efforts in expanding its foothold in the international market, especially Latin America and other emerging markets.

CareFusion continues to build a solid foundation for future growth. The company faces competition from Baxter International (BAX - Analyst Report) and Becton, Dickinson and Company (BDX - Analyst Report) among others. While a slew of product recalls represent a downside, CareFusion is growing both through the organic and the inorganic route.  

We currently have a long-term Neutral recommendation on CareFusion, supported by a short-term Zacks #1 Rank (Strong Buy).

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