American Medical Stays at Neutral - Analyst Blog

We recently reiterated our ‘Neutral’ recommendation on American Medical Systems Holdings, Inc. (AMMD) with a target price of $20 based on a P/E of approximately 16.4x our fiscal 2010 EPS estimate of $1.22.

American Medical reported fourth-quarter earnings per share of 35 cents, surpassing the Zacks Consensus Estimate of 34 cents and the year-ago earnings of 26 cents. For fiscal 2009, earnings per share were $1.09, ahead of 70 cents, a year-ago.

Total revenue in the fourth quarter increased 9% year over year to $146 million. Excluding a favorable foreign currency translation (FX), net sales increased 6.1% year over year.

In terms of business segments: Men’s Health sales increased 8.2% year over year to $63.5 million. Growth was primarily due to higher demand for the Erectile Restoration product line, partly offset by lower demand for Male Continence products.

Women’s Health revenues increased 8.9% year over year to $49.2 million. Growth can be primarily attributed to higher sales of Pelvic Floor Repair products buoyed by the launch of Elevate anterior in mid-2009. BPH Therapy revenues increased 10.3% year over year to $33.3 million.

American Medical witnessed an expansion in margins in the fourth quarter. Gross margin increased 310 basis points (bps) year over year to 82.2%. Operating margin increased 1,500 bps year over year to 30.9%.

In fiscal 2009, total revenue increased 3.5% year over year to $519.3 million. Excluding FX, net sales increased 5.2% year over year.

Headquartered in Minnetonka, Minnesota and founded in 1972, American Medical Systems focuses on men’s and women’s pelvic health. The company’s major competitors are Johnson & Johnson (JNJ) and Boston Scientific Corp. (BSX).