Zacks_Analysts' Blog : Earnings Preview: C.R. Bard - Analyst Blog

Leading medical devices maker C.R. Bard (BCR) is scheduled to report its fourth quarter and fiscal 2011 results after the closing bell on Tuesday, January 31. The New Jersey-based company envisions its sales for the fourth quarter would grow 3%-5% in constant currency with new acquisitions contributing 1% to the growth. Moreover, it expects adjusted earnings of $1.68 a share for the quarter.

The current Zacks Consensus Estimates for revenues and earnings for the fourth quarter are $748 million and $1.68 a share, respectively.

Third Quarter Flashback

C.R. Bard’s third-quarter 2011 adjusted earnings per share of $1.62 beat the Zacks Consensus Estimate by a couple of cents. Profit (as reported) rose 2% year over year to $130.1 million (or $1.46 a share) on higher sales.

Revenues rose 6% year over year to $719.2 million, but missed the Zacks Consensus Estimate of $724 million. Sales were driven by growth across the board with the company’s Vascular and Oncology business leading from the front, backed by higher overseas revenues.

U.S. sales rose just 2%, impacted by sustained softness across several product lines. International revenues spiked 17%, boosted by the emerging markets.

Revenues from the core Vascular segment shot up 9%, benefiting from the contributions of the SenoRx acquisition. Oncology sales climbed 9% while Urology sales edged up 2%. Surgical Specialties division registered a growth of 3%.

Estimate Revisions Trend

Agreement

Estimates for the December quarter elicited limited activity over the past week and month. Out of the 20 analysts covering the stock, just one has made a negative revision over the last 7 days with none moving in the opposite direction. Over the last 30 days, there has been one upward revision coupled with a sole reverse movement.

No movement has been observed in either direction for fiscal 2011 over the past week.  Over the past 30 days, 1 analyst (out of 19) has raised his/her forecast for the fiscal with none moving in the reverse direction.

Magnitude

Given the relative lack of movements, estimates for the fourth quarter have been static (at $1.68) over the past week and month. A similar trend applies for fiscal 2011. The current Zacks Consensus Estimate for fiscal 2011 is $6.38, representing an estimated year-over-year growth of 13.96%.  

With respect to earnings surprises, C.R. Bard has posted three positive surprises in the preceding four quarters while it met the Zacks Consensus Estimate on the other occasion. The company has delivered an average positive earnings surprise of 2.91% over the past four quarters, implying that it has beaten the Zacks Consensus Estimate by that measure.

Our View

C.R. Bard’s well-diversified end-markets and vast product portfolio insulate it from fluctuations in any single therapeutic category. The company’s resource depth and focused innovation are its major competitive advantages.

C.R. Bard is also making prudent use of cash in the form of acquisitions and share repurchases. The acquisition of SenoRx has expanded the company’s product portfolio beyond its existing product range meant for ultrasound imaging.

C.R. Bard, in October 2011, agreed to buy Colorado-based privately-held medical devices maker Medivance Inc. for roughly $250 million. The acquisition goes well with the company’s business model and will boost its critical care offerings. Moreover, the company recently scooped up Minnesota-based Lutonix, Inc. for roughly $225 million. The acquisition will enable C.R. Bard to expand into the large and lucrative market for drug-coated balloons.

C.R. Bard’s incremental R&D investment should boost its pipeline and give way to product innovation/differentiation. We expect the company to provide an update on the progress in its pipeline (including new product launches) in the fourth quarter call.

We expect new product flow and sales force consolidation to drive organic revenues growth and help C.R. Bard to meet its sales objective. The newly launched Ventralex ST umbilical hernia repair product, Ventrio ST ventral hernia repair system and the Echo PS mesh positioning system should support revenue growth.

However, heightened competition and pricing/procedure volume pressure remain areas of concern. C.R. Bard faces a mix of competitors ranging from large manufacturers with multiple business lines like Boston Scientific (BSX) and Johnson & Johnson (JNJ) to smaller manufacturers that offer a limited selection of products like Angiodynamics (ANGO).

Moreover, a soft U.S. market may weigh on the company’s fourth quarter results. We currently have a Neutral rating on C.R. Bard. The stock currently retains a Zacks #4 Rank, which translates into a short-term “Sell” recommendation.