CR Bard Q1 Earnings Rise, Beat Ests - Analyst Blog

Medical technologies major CR Bard Inc. BCR posted an 18.6% rise in adjusted earnings per share to $1.91 for the first quarter of 2014 from $1.61 in the prior-year quarter. Earnings per share surpassed the Zacks Consensus Estimate of $1.86 as well as the company's previously announced guidance range of $1.83 to $1.87.

Adjusted earnings rose 12.8% to $152.6 million in the quarter from $135.3 million in the prior-year quarter. Adjusted earnings exclude one-time items such as acquisition-related expenses and gain on sale of investment.

On a reported basis, BCR's net earnings were $148.4 million or $1.86 per share for the first quarter, up 63.6% and 72.2% from $90.7 million and $1.08 per share, respectively, in the year-ago quarter.

Revenue

Revenues grew 8.0% both in terms of reported and constant currency on a year-over-year basis to $799.3 million. Revenues surpassed the Zacks Consensus Estimate of $792 million while revenue growth exceeded the company's previously announced guidance of 6 to 7%.

The quarterly royalty payment from Gore, which was included in revenues for the first time in the reported quarter, was $37.6 million, which reflected an increase of 4% over the payment made to the court a year ago.

On a geographic basis, revenues in the U.S. grew 10.6% to $551.4 million from $498.5 million a year ago. Excluding the royalty payment which was reported entirely in the U.S., revenues went up 3.0% in the quarter.  International revenues grew 2.5% both in terms of reported and constant currency to $247.9 million, led by healthy sales in emerging markets.

Segment Results

Revenues from the core Vascular category increased 7.9% to $219.2 million, both in terms of reported and constant currency. Sales in the U.S. dipped 4% whereas international sales were up 5%. Excluding the royalty payment from Gore and the impact from the divestiture of the Electrophysiology business, total Vascular sales were flat in the first quarter.

Revenues from vascular graft went down 1% in the quarter. Excluding the royalty payment, the Endovascular business was flat in the first quarter. Within Endovascular business, biopsy line revenues rose 5%, due to strong international growth. Revenues from the peripheral PTA line increased 7% in the quarter with healthy double-digit growth outside the U.S. driven by sales of the Lutonix drug-coated balloon.

Revenues from the vena cava filter line increased 5%, whereas, revenues from the Stent business declined 11% due to continued price headwinds.

Revenues from the Urology business increased 6.7% to $201.4 million, both in terms of reported and constant currency. Revenues from the U.S. went up 5%, while it grew 12% internationally. Sale of products acquired from Rochester Medical contributed to global growth in this business.

Within Urology, revenues from the basic drainage business increased 7%, with about 500 bps of growth generated from the acquired Rochester medical products. I.C. Foley's revenues were flat globally and down 3% in the U.S. Revenues from the continence business grew 25% in the quarter, mainly driven by the new male external catheter sales.

Revenues from neurological specialties went up 6% with the brachytherapy revenues down 8%. Revenues from StatLock catheter stabilization line, however, decreased 4% in the quarter.

Revenues from the Oncology category rose 5.7% to $219.0 million, both in reported and constant foreign exchange. Revenues were up 5% in the U.S. and 11% outside the U.S. Revenues from peripherally inserted central catheters (PICC) grew 11% in the quarter with continued strong performance in the U.S. and abroad. However, revenues from Vascular Access ultrasound product line dipped 5% in the quarter. Lastly, revenues from dialysis catheter business rose 8% in the first quarter.

Revenues from Surgical Specialties business increased 12.4% to $135.2 million. Revenues from the U.S. rose 10% while international revenues were up 20% in the quarter. About 10 percentage points of global growth was attributed to the sales of Arista Hemostat product line acquired during the last quarter.

Revenues from the soft tissue repair business grew 3% in the quarter. Within soft tissue, synthetic hernia products revenues posted a double-digit rise from the comparable last-year quarter while biologics revenues were down 12%. Hernia fixation business revenues declined 12% and performance irrigation business was down 6% in the quarter.

Revenues from Other product line escalated 17.2% to $24.5 million from $20.9 million in the first quarter of 2013.

Margins

On an adjusted basis, gross margin was $490.4 million or 61.4%, up 100 bps from the prior-year quarter. Marketing, selling, and administrative expenses increased 9.5% to $236.7 million on an adjusted basis while, as a percentage of sales, it increased 40 bps to 29.6%.

Research and development expenses increased 8.5% to $63.9 million on an adjusted basis. As a percentage of sales, R&D remained flat at 8% on both reported and adjusted bases.

Adjusted operating income increased 11.4% to $190.7 million while adjusted operating margin increased 80 bps to 23.9% in the first quarter.

Financial Position

BCR ended the first quarter with cash, restricted cash and short-term investments of approximately $1 billion versus $1.1 billion as of Dec 31, 2013. Total debt remained flat at $1.4 billion compared with the same at the end of last year. Debt-to-capital ratio was roughly 41% as of Mar 31, 2014.

Capital expenditures amounted to $22.7 million for the first quarter.

Guidance

Moving ahead, BCR expects constant currency sales growth between 6 and 8% in the second quarter of 2014. On the earnings front, the company expects adjusted earnings in the range of $1.98 to $2.02 a share. The current Zacks Consensus Estimate of $2.03 for the quarter lies above the guided range.

The company reiterated its adjusted EPS guidance between $8.20 and $8.30 for the full year. The current Zacks Consensus Estimate of $8.25 lies within the guided range.

Zacks Rank

BCR currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the medical/dental supply industry include Align Technology Inc. ALGN, Cardinal Health, Inc. CAH and The Cooper Companies Inc. COO. While Align Technology carries a Zacks Rank #1 (Strong Buy), both Cardinal Health and The Cooper Companies retain a Zacks Rank #2 (Buy).