CONMED Corporation (CNMD Quick QuoteCNMD - Free Report) is well poised for growth in the coming quarters, courtesy of its broad product spectrum. The optimism, led by the solid fourth-quarter 2023 performance and a potential General Surgery, is expected to contribute further. However, headwinds from supply-chain constraints and data security threats persist.

This currently Zacks Rank #3 (Hold) company’s shares have lost 15.2% in the past year against the industry’s 3.2% growth. The S&P 500 Index has increased 24.8% in the same time frame.

CONMED, the renowned global medical products manufacturer specializing in surgical instruments and devices, has a market capitalization of $2.46 billion. The company projects 25.4% growth over the next five years and expects to maintain its strong performance going forward.

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Its earnings surpassed estimates in three of the trailing four quarters and missed the same once, delivering an average surprise of 4.75%.

Let’s delve deeper.

Potential in General Surgery: The segment 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 a competitive edge in the MedTech space. One of these products, the Anchor Tissue Retrieval bag, deserves a special mention. It is one of the major platforms in the company’s specimen bag portfolio.

Broad Product Spectrum: CONMED offers a broad line of surgical products, including several new devices in the Orthopedic, Laparoscopic, Robotic, Open Surgery, Gastroenterology, Pulmonary and Cardiology sections.

Products like the Hi-Fi Tape and Hi-Fi suture interface are critical components of repair security in the rotator cuff repair space. During the fourth quarter, CNMD remained focused on the introduction of a delivery system for MIS rotator cuff repair.

Other notable offerings were the MicroFree platform in Orthopedics, the TruShot, the Y-Knot Pro and the CRYSTALVIEW Pump. The Anchor Tissue Retrieval bag is a unique product under the General Surgery arm.

Solid Recurring Revenue Base: Approximately 80% of CONMED’s revenues are recurring, derived from the sale of disposable single-use products. The remaining 20% comes from the sale of capital equipment (such as powered drills and saws for surgery, electrosurgical generators, video-imaging cameras, fluid control systems and surgical hand-pieces). This, in turn, creates demand for complementary single-use items.

Hospitals and clinics are expanding the use of single-use, disposable products. This endeavor is aimed at reducing expenses related to sterilizing surgical instruments and products following surgery.

CONMED’s revenues totaled $327 million in the fourth quarter of 2023, up 30.4% year over year. Additional sales from newly acquired businesses contributed approximately 40 basis points of growth.

Downsides

Regulatory Requirements: Substantially, all CONMED products are classified as class II medical devices, subject to regulations from numerous agencies and legislative bodies worldwide. As a manufacturer of medical devices, the company’s manufacturing processes and facilities are subject to on-site inspection and constant review by the FDA for compliance with the Quality System Regulations.

Supply Constraints: Although CONMED recorded strong growth across all segments in the fourth quarter, the legacy orthopedic business was hurt by supply-chain constraints. The supply disruption continued to pose a headwind for the company during the fourth quarter of 2023.

CNMD expects supply-chain issues to improve from the first quarter of 2024. Moreover, revenues were hurt by unfavorable currency movement during the fourth quarter.

Estimate Trend

CONMED is witnessing a negative estimate revision trend for 2024. In the past 30 days, the Zacks Consensus Estimate for earnings declined from $4.38 per share to $4.35.

The same for the company’s first-quarter revenues is pegged at $305.6 million, indicating a 3.4% improvement from the year-ago quarter’s reported number. The bottom-line estimate for the first quarter is expected to improve 16.7% from the year-ago period’s level of 77 cents.

CONMED Corporation Price

CONMED Corporation price | CONMED Corporation Quote

Stocks to Consider

Some better-ranked stocks in the broader medical space are DaVita Inc. (DVA Quick QuoteDVA - Free Report) , Cardinal Health, Inc. (CAH Quick QuoteCAH - Free Report) and Cencora (COR Quick QuoteCOR - Free Report) .

DaVita, carrying a Zacks Rank #1 (Strong Buy) at present, has an estimated long-term growth rate of 12.1%. Its earnings surpassed estimates in each of the trailing four quarters, delivering an average surprise of 35.6%. You can see the complete list of today’s Zacks #1 Rank stocks here.

DaVita’s shares have risen 47.1% compared with the industry’s 11.6% growth in the past year.

Cardinal Health, carrying a Zacks Rank of 1 at present, has an estimated long-term growth rate of 15.9%. Its earnings surpassed estimates in each of the trailing four quarters, delivering an average surprise of 15.6%.

CAH’s shares have risen 33.6% compared with the industry’s 11.3% growth in the past year.

Cencora, carrying a Zacks Rank of 2 (Buy) at present, has an estimated long-term growth rate of 9.8%. Its earnings surpassed estimates in each of the trailing four quarters, delivering an average surprise of 6.7%.

Cencora’s shares have rallied 51.5% in the past year compared with the industry’s 3.6% growth.