Leading medical devices maker C. R. Bard (BCR) reported first-quarter fiscal 2011 results after the closing bell on April 21, with adjusted earnings per share of $1.51 outshining the Zacks Consensus Estimate of $1.46 and the year-ago earnings of $1.25. Adjusted earnings exclude charges associated with acquisitions. Net income (as reported) jumped 9% year over year to $131.9 million (or $1.49 per share) owing to strong performance of the New Jersey-based company’s core vascular business.
Revenues climbed 8% year over year to $700.3 million, also beating the Zacks Consensus Estimate of $694 million. Sales were boosted by sustained healthy performance by the company’s Vascular business and healthy growth in emerging markets. Geographically, U.S. and international sales rose 7% and 9%, respectively, to $487.1 million and $213.2 million.
Segment Analysis
Revenues from C.R. Bard’s vascular franchise soared 15% year over year in the quarter to $198.3 million, driven by healthy sales from both U.S. and international operations with strong contributions from the SenoRx acquisition.
Within vascular, endovascular (up 23%), peripheral PTA (up 29%) and stent (up 7%) businesses grew in the quarter, partly offset by lower vena cava filter sales. Electrophysiology (“EP”) sales fell 1% in the quarter. Endovascular sales were fueled by a 62% growth in biopsy products sales, strongly backed by the SenoRx acquisition.
Oncology sales climbed 7% to $186.4 million on the back of growth across peripherally inserted central catheters/PICC (up 7%), ports (up 7%), vascular access ultrasound products (up 13%) and dialysis catheter (up 11%) businesses.
Urology sales increased 3% to $179.5 million with basic drainage and I.C. Foley products sales growing 4% and 3%, respectively. Within urology, continence and urology specialty products sales fell in the quarter while revenues from slings increased at a double-digit rate.
Revenues from the Surgical Specialties business rose 5% to $114.9 million. Soft tissue repair business grew 10% in the quarter, boosted by strong growth in natural tissue products (up 50%). Sales from hernia fixation business increased 20% driven by strong international growth. However, synthetic hernia products declined 3% while performance irrigation and hemostasis businesses declined 9% and 11%, respectively.
Gross margin rose to 62.2% from 61.2% supported by higher revenues. Marketing, selling and administrative expenses as a percentage of sales edged up to 27.7% from 27.6%. Research and development expenses (as a percentage of sales) rose to 6.9% from 6.2% a year ago. Operating margin declined to 26.3% from 26.9% a year ago.
Financial Condition
C.R. Bard exited the quarter with cash and short-term investments of $748.3 million (up 2% year over year) with total debt of $895.3 million.
Outlook and Recommendation
Looking ahead, C.R. Bard expects its second-quarter fiscal 2011 sales to grow 6%-8% in constant currency. The adjusted EPS target for the quarter has been pegged in the range of $1.53 to $1.57 as against the current Zacks Consensus Estimate of $1.59.
C.R. Bard’s well-diversified end-markets and vast product portfolio insulate it from fluctuations in any single therapeutic category. The company’s incremental R&D investment should boost its pipeline and give way to product innovation/differentiation. We expect new product flow to drive organic revenue growth and help C.R. Bard to meet its sales objective.
However, the company contends with heightened competition and pricing pressure and its aggressive acquisition strategy has inherent integration risk. C.R. Bard competes with Boston Scientific Corporation (BSX), Johnson & Johnson (JNJ) and Angiodynamics Inc. (ANGO), among others. Currently, we have a Neutral recommendation on the stock, backed by a short-term Zacks #3 Rank (Hold).
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