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Here's Why You Should Hold on to CONMED (CNMD) Stock for Now

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CONMED Corporation (CNMD - Free Report) is well poised for growth backed by a broad product portfolio and solid potential from core units — Orthopedic Surgery and General Surgery. However, forex remains a concern.

Over the past three months, shares of CONMED have gained 5.1% against the industry’s decline of 2%.

The company, with a market capitalization of $2.44 billion, is a major medical products manufacturer specializing in surgical instruments and devices for minimally-invasive procedures and monitoring. It anticipates earnings improvement of 10.8% over the next five years. Moreover, it has a trailing four-quarter earnings surprise of 30.2%, on average.

Let’s take a closer look at the factors that substantiate the company’s Zacks Rank #3 (Hold).

Consistent Strength in General Surgery: General Surgery consists of a complete line of endo-mechanical instrumentation for minimally-invasive laparoscopic and gastrointestinal procedures, a line of cardiac monitoring products as well as electrosurgical generators and related instruments. CONMED’s unique products and solutions within the General Surgery segment have been providing the company a competitive edge in the MedTech space. Of the most unique products under General Surgery, the Anchor Tissue Retrieval bag deserves a mention. This is one of the major platforms in CONMED’s specimen bag portfolio.

Continued R&D Focus: CONMED’s steady focus on innovation instills investor confidence. By the end of the fourth quarter of 2018, management at CONMED had announced that solid organic R&D pipeline and product innovations will provide CONMED a competitive edge. Additionally, the company’s surging R&D expenses reflect focus on innovation.

In the second quarter of 2020, research and development expenses for the second quarter were 5.5% of total sales.

Broad Product Spectrum: CONMED offers a broad line of surgical products. In the recent past, CONMED introduced the MicroFree platform in Orthopedics, the TruShot, the Y-Knot Pro and the CRYSTALVIEW Pump. With increased product offerings, the company can accelerate its topline. Products like the IM8000 surgical visualization system and the Edge Ablation system will drive top-line growth going forward.

Furthermore, CONMED’s AssistArm technology delivers unique limb positioning techniques. Other products including 3 sports medicine products, 3 endomechanical offerings, an electrosurgical council and a new 2D Arthroscopy video system areworth a mention.

The company saw continued solid demand for AirSeal and Buffalo Filter product lines throughout the second quarter. This was driven by enhanced clinical training, improved surgical safety protocols and increasing access to medical facilities. Both of these product lines grew on a year-over-year basis globally, both in the second quarter as well as year to date.

What’s Deterring the Stock?

Foreign exchange movements are affecting the company’s results. CONMED derives significant portion of revenues from international operations.

The strong U.S. dollar will continue to limit sales growth. Per the fourth-quarter 2019 earnings call, the negative impact to sales from forex is anticipated between 120 basis points (bps) and 150 bps for 2020.

Which Way are Estimates Headed?

For 2020, the Zacks Consensus Estimate for revenues is pegged at $832.6 million, indicating a decline of 12.8% from the year-ago period. The same for earnings stands at $1.51 per share, suggesting a decrease of 42.8% from the year-ago reported figure.

Zacks Rank and Key Picks

A few better-ranked stocks from the broader medical space include OPKO Health (OPK - Free Report) , Surmodics (SRDX - Free Report)  and Merit Medical Systems (MMSI - Free Report) .

OPKO Health’s long-term earnings growth rate is estimated at 12%. The company presently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Surmodics’ long-term earnings growth rate is estimated at 10%. The company presently carries a Zacks Rank #2.

Merit Medical Systems’ long-term earnings growth rate is estimated at 11.9%. It currently carries a Zacks Rank #2.

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