We retain our Neutral recommendation for C.R. Bard (BCR) following its mixed third quarter 2011 results. Earnings for the quarter topped the Zacks Consensus Estimate while sales missed the forecast.
Revenue rose 6% year over year, fueled by healthy contributions from the company’s Vascular and Oncology businesses, backed by SenoRx acquisition and overseas operations.
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’s incremental R&D investment should boost its pipeline and give way to product innovation/differentiation.
C.R. Bard is also making prudent use of cash in the form of acquisitions and share repurchases. During its third quarter call, the company announced its acquisition of Colorado-based Medivance Inc for roughly $250 million. The acquisition augurs well with C.R. Bard’s business model and will boost its offerings in the critical care settings (including myocardial infarction, traumatic brain injury and stroke).
We expect new products to drive organic revenue growth and help C.R. Bard to meet its sales objective. The new Ventralex ST umbilical hernia repair product, Ventrio ST ventral hernia repair system and the Echo PS mesh positioning system should support growth going ahead.
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 continue to weigh on the company’s results. Our recommendation on the stock is in tandem with a short-term Zacks #3 Rank (Hold).
