Bear of the Day: ICU Medical (ICUI) - Bear of the Day

Earnings estimates have plummeted for ICU Medical ICUI following its Q4 results in February.

It is a Zacks Rank #5 (Strong Sell) stock.

While shares of ICU Medical are down more than -10% so far this year, the stock could very well remain under pressure until its earnings momentum improves.

ICU Medical develops, manufactures and sells medical technologies used in vascular therapy, oncology, and critical care applications. Its complete product line includes custom IV systems, closed delivery systems for hazardous drugs, needlefree IV connectors, catheters and cardiac monitoring systems. It is headquartered in San Clemente, California.

Fourth Quarter Results

ICU Medical reported its fourth quarter 2013 results on February 12. Revenue fell 6% year-over-year to $77.9 million, well short of the consensus of $84.0 million. Growth in international sales was more than offset by weakness in domestic sales.

Earnings per share came in at 86 cents, which was ahead of the Zacks Consensus Estimate of 74 cents. However, this "beat" was driven in large part by a lower tax rate thanks to a one-time benefit from a change in foreign tax legislation.

Estimates Plunge

Following Q4 results, analysts revised their estimates significantly lower for both 2014 and 2015, sending the stock to a Zacks Rank #5 (Strong Sell). The 2014 Zacks Consensus Estimate is now $1.29, down from $2.73 before the report. The 2015 consensus is currently $1.43, down from $2.86 over the same period.

You can see this dramatic cut in estimates in the company's "Price & Consensus" chart:

Valuation

Shares of ICU Medical are down more than -10% year-to-date, but the stock does not look cheap. Shares trade at 43x 12-month forward earnings, a significant premium to both its historical median and the industry median. Its price to cash flow ratio is a much more reasonable at 14x, however.

The Bottom Line

With negative sales growth, a lofty P/E ratio and falling earnings estimates, investors should consider avoiding ICU Medical until its earnings picture improves.

Todd Bunton, CFA is the Growth & Income Stock Strategist for Zacks Investment Research and Editor of the Income Plus Investor service.

 
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