C. R. Bard (BCR) reported third-quarter fiscal 2010 results after the market closed on October 21, with an adjusted (excluding one-time items) earnings per share of $1.43 beating the Zacks Consensus Estimate of $1.40 and exceeding the year-ago earnings of $1.31.
However, net income dipped 2% year-over-year to $127.5 million (or $1.34 a share), hit by acquisition and tax-related charges, offsetting sales growth driven by healthy performances from the Vascular and Surgical Specialties businesses.
Revenues leapt 6% year-over-year to $678.4 million, but missed the Zacks Consensus Estimate of $687 million. Barring foreign currency translation, sales increased 8% year-over-year. Geographically, U.S. sales (up 8%) contributed 71% to C.R. Bard’s total revenues while international sales (up 2%) accounted for the balance.
Segment-wise Performance
Revenues from the company’s core vascular segment grew 10% year-over-year to $190.7 million. Surgical Specialties division recorded the highest growth with revenues surging 12% year-over-year to $104.6 million. The division is benefiting from healthy demand for soft tissue repair products. Oncology revenues grew 7% to $183.3 million while Urology sales grew by a mere 1% year over year to $179 million.
Gross margin increased to a record 62.9% from 62.2% a year-ago, benefiting from higher sales. Marketing, selling and administrative expenses as a percentage of sales increased to 27.4% from 25.8%. Research and development expenses (as a percentage of sales) rose to 7% from 6.7% a year-ago. Operating margin declined to 27% from 29.1% a year-ago on account of higher costs.
Outlook and Recommendation
C.R. Bard has not provided any updated financial guidance. The company expects its $200 million acquisition (completed in July 2010) of medical devices maker SenoRx Inc to dilute its fiscal 2010 EPS by 8 to 11 cents, and adjusted EPS by 3 to 6 cents. The adjusted EPS target for fiscal 2010 has been pegged at $5.49 as against the current Zacks Consensus Estimate of $5.52.
Bard designs, manufactures and markets medical, surgical, diagnostic and patient care devices worldwide. The company faces a mix of competitors ranging from large manufacturers with multiple business lines like Boston Scientific Corporation (BSX) and Johnson & Johnson (JNJ) to smaller manufacturers that offer a limited selection of products like Angiodynamics Inc. (ANGO).
C.R. Bard’s well-diversified end-markets and vast product portfolio (used in life-saving less invasive surgical procedures) insulate it from fluctuations in any single therapeutic category. However, the company contends with heightened competition and pricing pressure and its aggressive acquisition strategy has inherent integration risk. We are currently Neutral on C.R. Bard.
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