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CONMED (CNMD) Up 9.1% Since Earnings Report: Can It Continue?

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It has been about a month since the last earnings report for CONMED Corporation (CNMD - Free Report) . Shares have added about 9.1% in that time frame.

Will the recent positive trend continue leading up to its next earnings release, or is CNMD due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Recent Earnings

CONMED reported first-quarter 2018 adjusted earnings per share of 53 cents, beating the Zacks Consensus Estimate by 23.3%. Adjusted earnings also improved 39.5% year over year.

Revenues came in at $202.1 million, outpacing the Zacks Consensus Estimate by 2.6%. Revenues increased 8.3% year over year as reported and 6.8% at constant currency (cc).

CONMED’s domestic revenues in the reported quarter, which represents 52.6% of total revenues, rose 6.9% on a year-over-year basis, courtesy of growth in both General Surgery and Orthopedics. Internationally, revenues increased 10% as reported and 4.7% at cc, representing 47.4% of total revenues.

Segment Details

Orthopedic Surgery

Orthopedic surgery accounted for 53.9% of the company’s revenues in the quarter. The segment registered revenues worth $108.9 million, up 4.9% on a year-over-year basis, driven by robust growth in capital sales.

Domestically, Orthopedics revenues recorded growth in two consecutive quarters after a long time. Internationally, Orthopedics revenues increased 1.6% year over year, marking the eighth consecutive quarter of growth.

General Surgery

This segment contributed 46% to the quarter’s total revenues. For the quarter under review, the segment’s revenues came in at $93.2 million, up 12.6% year over year.

Per management, growth can be attributed to strong performances across the product portfolio. Furthermore, domestically, first-quarter General Surgery sales increased to 12.8%, and internationally, General Surgery sales rose 12.1%.

Margins

Adjusted gross margin increased 50 basis points (bps) year over year to 54.2% of revenues. Gross profit rose 9.7% on a year-over-year basis.

Adjusted EBITDA margin in the first quarter was 17.1%, compared with 16.4% in the year-ago quarter. EBITDA grew 13.9% on a year-over-year basis.

Financial Condition

The company’s cash balance at the end of the first quarter was $21.1 million, compared with $32.6 million in the prior-year quarter.

Cash flow from operations was $25 million in the first quarter of 2018 compared with $15.3 million in the prior-year quarter.

Long-term debt at the end of the quarter was $442.4 million, down 6.2% sequentially.

View Raised

Encouraged by the solid first-quarter performance, CONMED raised its financial guidance.

The company now expects full-year 2018 constant-currency sales growth in the range of 4.5% to 5.5%, higher than the previous range of 4.0% to 5.0%.

Adjusted net earnings per share are expected within $2.15-2.20, compared to the earlier $2.11-2.17. This shows 14% to 16% growth over 2017.

Additionally, management expects full-year gross margin to improve 50 to 100 bps, primarily driven by the company’s cost-saving initiatives.

Full-year R&D expenses are expected in the range of 4.5-5% as a percentage of total revenues.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates. There have been three revisions lower for the current quarter. Last month, the consensus estimate has shifted downward by 9.1% due to these changes.

CONMED Corporation Price and Consensus

 

VGM Scores

At this time, CNMD has a great Growth Score of A, though it is lagging a bit on the momentum front with a B. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Based on our scores, the stock is primarily suitable for growth investors while also being suitable for those looking for momentum and to a lesser degree value.

Outlook

Estimates have been broadly trending downward for the stock and the magnitude of these revisions indicates a downward shift. Notably, CNMD has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.




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