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Greatbatch on Growth Track

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Management of Greatbatch, Inc. has updated institutional investors and research analysts regarding its growth drivers in the core business and development in its pipeline at the Investor Day conference held on Mar 18. It also reiterated the guidance for 2013 along with its long-term growth strategy.

Greatbatch is primarily a producer and supplier of batteries, capacitors, and components used in implantable medical devices (IMDs). According to Thomas J. Hook, President & CEO, almost 95% of all active IMDs are developed with Greatbatch’s component products. This is encouraging news for the company as management believes that it is now capable of producing complete medical devices for Original Equipment Manufacturer (OEM) customers. 

Moreover, Greatbatch boasts a vast intellectual property (IP) portfolio of more than 1,000 patents. The IP along with better sales and marketing initiatives will allow the company to gain market share in the multi-billion dollar worth cardiac and neuromodulation, portable medical, vascular and orthopedics markets. Additionally, the company forged strategic long-term agreements with its OEM clients to secure healthy revenue growth.

Management also provided an update on its latest growth driver, the Algostim – a spinal cord stimulation (SCS) system – intended to cure chronic pain in the trunk and limbs. The innovative device has considerable scope to capture a significant share in the $1.4 billion SCS market. Greatbatch is planning to apply for Food and Drug Administration (FDA), Pre-Market Approval (PMA) and CE Mark approval for the device in the second half of the year. Currently, it is on the lookout for commercialization partners for the device.

In addition, Greatbatch reiterated its 2013 guidance. It expects revenues for 2013 in the band of $660–$680 million, up 2%–5% year over year. Adjusted earnings per share are anticipated between $1.90 and $2.00 for the year, up 7%–13% from 2012.

The current Zacks Consensus Estimates for revenues and earnings per share for full year 2013 are $675 million and $1.97, respectively.

Our Take

We are encouraged by Greatbatch’s effort to transform into a full-fledged medical devices company. Its top customers include leading players such as Medtronic (MDT - Free Report) and St. Jude Medical . The company’s pipeline and recent acquisitions should propel growth going forward.

However, issues in the Orthopedic business, a soft CRM market and pricing pressure remain headwinds for the company. Further, Greatbatch needs to enhance its operational efficiency to boost bottom line growth following the shut down of its Swiss facilities.

Greatbatch, Inc. currently retains a Zacks Rank #3 (Hold). While we remain on the sidelines for Greatbatch, semi-discretes company – Cree, Inc. (CREE - Free Report) with a Zacks Rank #2 (Buy) warrants a look.

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