On Sep 17, Zacks Investment Research downgraded CONMED Corporation (CNMD - Free Report) to a Zacks Rank #4 (Sell) from Zacks Rank #3 (Hold).
Why the Downgrade?
CONMED witnessed downward estimate revisions following disappointing second-quarter 2013 results. The medical technologies and surgical devices company also provided a lower guidance for 2013.
On July 26, CONMED reported second-quarter adjusted earnings per share that remained flat year-over-year at 43 cents and missed the Zacks Consensus Estimate by 2 cents. Revenues dropped 1.7% (2.3% at constant exchange rate) to $193.0 million, reflecting a soft healthcare utilization and spending environment in the global economy. Revenues missed the Zacks Consensus Estimate by 1.5%.
Ongoing dismal macroeconomic conditions along with poor capital spending and sluggish volume/procedure growth are major causes of worry. Moreover, the company operates in a highly-competitive orthopedic surgery market against larger and more technically-competent companies. However, the only positive factor in the second quarter results was the company’s higher margins driven by leveraged operating efficiency and cost-saving initiatives undertaken by management.
CONMED lowered its guidance for 2013, owing to the difficult austerity measures persisting in Europe as well as flattish healthcare utilization rate in the U.S. The company narrowed its previous earnings guidance of $1.80-$1.90 per share to $1.80-$1.85 per share. The guidance assumes negative impact of the medical device excise tax and foreign exchange headwinds. Similarly, management also lowered its estimated 2013 sales forecast to $770 million–$775 million from the earlier prediction of $770 million–$780 million.
The Zacks Consensus Estimate for 2013 inched up 0.6% to $1.82 per share over the last 30 days. However, for 2014, the Zacks Consensus Estimate decreased by roughly 1% to $2.05 per share over the same period.
Other Stocks to Consider
Not all medical stocks are performing as poorly as CONMED. Other well-performing medical stocks that warrant a look are Alere Inc. , Affymetrix , and Quintiles Transnational Holdings Inc. . All these stocks carry a Zacks Rank #1 (Strong Buy).