CONMED Corporation (CNMD - Free Report) is one of the top players in the MedTech space. With a market capitalization of $1.72 billion, the company has topped estimates in the trailing four quarters. However, cutthroat competition in the MedTech space might hurt the stock’s prospects.
In a year’s time, the stock has rallied 20.5% against the industry’s 11.4% decline. The current level is also significantly higher than the S&P 500’s negative return of 8%.
Here we take a quick look at the major headwinds that are plaguing this Zacks Rank #3 (Hold) stock and discuss the factors that ensure near-term recovery.
Why Should You Hold CONMED?
CONMED’s steady focus on innovation instills investor confidence.
Earlier this year, CONMED received the de novo FDA approval of thoracic indication for AirSeal. This was the first ever approval of an access management platform for MIS procedures in the thoracic cavity. Notably, the company required substantial data in order to receive approval.
This approval expands the company’s indications and procedural base, and validates the strategy that it developed at the time of the SurgiQuest acquisition to advance both the technology and clinical application of the platform.
Additionally, the company’s surging operating expenses reflects focus on innovation. In the third quarter, CONMED’s R&D expenses totaled $14.1 million, up 70.8% on a year-over-year basis. For 2018, management expects R&D expenses in the range of 4.5-5%, as a percentage of total revenues.
What’s Deterring the Stock?
CONMED operates in a highly competitive environment that includes competition from companies like Johnson & Johnson, Medtronic, Smith & Nephew, Stryker Corporation and others. These organizations may have greater resources as well as larger research and development budgets compared with CONMED. Furthermore, the company falls behind the larger orthopedic players in product bundling arrangements, which provides them with a competitive edge.
Which Way are the Estimates Treading?
Unhindered by the above-mentioned issues, analysts are optimistic about CONMED.
The Zacks Consensus Estimate for fiscal fourth-quarter earnings is pegged at 73 cents, reflecting growth of 5.8% on a year-over-year basis. The same for the revenues stands at $229.2 million, mirroring a 3% improvement year over year.
For 2018, the Zacks Consensus Estimate for revenues is pegged at $846.4 million, reflecting growth of 6.3%. The same for adjusted earnings is pinned at $2.17, indicating a year-over-year rise of 14.8%.
Want More From the MedTech Space?
Some better-ranked stocks in the broader medical space are Veeva Systems Inc. (VEEV - Free Report) , Integer Holdings Corporation (ITGR - Free Report) and OPKO Health, Inc. (OPK - Free Report) .
Veeva Systems’ long-term earnings growth rate is projected at 19.5%. The stock currently flaunts a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Integer projects earnings growth rate of 31.2% for the fourth quarter. It currently carries a Zacks Rank #2 (Buy).
OPKO Health’s long-term earnings growth rate is projected at 12%. The stock presently sports a Zacks Rank of 1.
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