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Mindray Earnings Meet Ests, Guidance Down

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Chinese medical devices maker, Mindray Medical International Limited posted a 15.4% rise in adjusted earnings per share to 45 cents for the 2013 third-quarter from 39 cents a year ago and met the Zacks Consensus Estimate.

Adjusted net earnings rose 15.8% year over year to $54.5 million from $47.0 million in the third quarter of 2012. However, reported earnings decreased to $30.1 million or 25 cents per share from $35.8 million or 30 cents per share in the 2012-third quarter.

Net revenues grew 15.3% to $296.3 million, lying below the Zacks Consensus Estimate of $331.0 million. Unlike the second quarter of the year, international sales were much stronger than that in Mindray’s domestic market.  

International revenues grew 17.9% to $164.3 million while revenues from China grew at a slower pace of 12.1% to $132.0 million due to delays in purchasing activities in the quarter under review. Revenues grew impressively by 25% in Western Europe while some countries in the emerging markets continued to perform well.

Segment Revenues

Revenues from Patient Monitoring & Life Support Products rose 6.2% to $110.3 million from $103.8 million in the prior-year quarter, contributing 37.2% to overall net revenues.

Revenues from In-Vitro Diagnostic Products went up 14.2% to $83.0 million from $72.6 million in the prior-year quarter, contributing 28.0% to net revenues. Reagents sales accounted for 40.2% of this segment's net revenues.

Revenues from Medical Imaging Systems escalated 26.7% to $77.1 million from $60.9 million in the 2012-quarter, contributing 26.0% to net revenues.

Revenues from Others (including sales from the orthopedics business, service revenues from extended warranties, sales of accessories and repair service revenues for post-warranty period) zoomed 31.2% to $25.9 million from $19.8 million a year ago, contributing 8.8% to overall net revenues.


Adjusted gross profit rose 15.3% to $167.0 million but gross margin was flat at 56.4% in the quarter. Adjusted operating profit went up 8.1% to $54.5 million but operating margin dipped 120 basis points to 18.4% from 19.6% a year ago.

Financial Position

MR had $200.0 million in cash and cash equivalents as of Sep 30, 2013, down 19.3% from $247.9 million as of Dec 31, 2012. Total bank loans more than doubled to $314.9 million from $135.1 million as of Dec 31, 2012.

In the first nine months of 2013, cash flow from operating activities inched up 2.7% to $185.7 million from $180.8 million in the same period of 2012, due to higher net earnings. Capital expenditure surged 42.2% to $67.2 million compared with $47.2 million a year ago.

Lower Guidance

Mindray toned down its revenue forecast for the year due to sluggish hospital purchase trend in China. The company expects at least 13% rise in revenues over 2012 compared with the prior forecast of at least 18% for the year. MR also reduced its capital expenditures guidance to $100 million from $130 million for the year.

Our Take

Mindray is a bellwether in the Chinese MedTech industry with a solid international presence. A key distinction with domestic competitors is that the majority of Mindray’s products have CE Mark and/or Food and Drug Administration (FDA) clearance. MR maintains a decent product pipeline and brings out several new products each year. New products contribute in a major way to the company’s revenues. However, sluggish market in China is a matter of concern for the company’s earnings.

Currently, MR carries a Zacks Rank #2 (Buy). Other stocks that are also performing well in the medical instruments industry include Cynosure, Inc. , CryoLife, Inc. (CRY - Free Report) and Natus Medical Inc. (BABY - Free Report) . All of them carry a Zacks Rank #1 (Strong Buy).

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