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On Apr 3, we retained Symmetry Medical (SMA - Analyst Report) at Neutral, following its fourth-quarter results. Although both revenues and earnings missed estimates, it managed to grow significantly year-over-year.

Why the Retention?

On Feb 21, Symmetry posted fourth-quarter 2012 adjusted earnings of 15 cents a share, which missed the Zacks Consensus Estimate of 19 cents. The year-ago earnings were 3 cents a share. Additionally, revenues jumped 26% year over year to $106.6 million in the fourth quarter, led by strong sales in the Original Equipment Manufacturer (“OEM”) Solutions and Symmetry Surgical businesses. However, reported revenues were lower than the Zacks Consensus Estimate of $109 million.

The company’s earnings have failed to beat the Zacks Consensus Estimates in 2 out of the last 4 quarters with an average negative surprise of 4.82%. However, it managed to meet the estimates in the first quarter of 2012 and beat estimates in the third quarter. Following the earnings release, the Zacks Consensus Estimate for 2013 dropped by 8.8% to 73 cents per share but jumped by 32.9% to 97 cents per share for 2014.

Warsaw, Ind.-based Symmetry is an instruments supplier to orthopedic device manufacturers. Its Original Equipment Manufacturer (OEM) business is showing gradual signs of stability on the back of higher Instrument sales and a turnaround in implant sales but the cases segment continues to be a drag. Symmetry Surgical is growing at a healthy pace on the back of acquisitions.

Symmetry is taking strategic initiatives to improve operating efficiency and launch innovative products. Margins are also improving. However, uncertainty related to growth in global orthopedic procedures as well as a tight capital spending environment is affecting the core OEM business. The company’s high level of indebtedness along with currency fluctuations remain areas of concern.

Other Stocks to Consider

Medical products companies such as Nuvasive (NUVA - Snapshot Report), Hanger (HGR - Analyst Report) and Covidien (COV - Analyst Report) warrant a look. While Nuvasive carries a Zacks Rank #1 (Strong Buy), the other 2 stocks carry a Zacks Rank #2 (Buy).

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