We maintain our Neutral recommendation on leading pelvic-health devices maker American Medical Systems (AMMD). Earnings for third-quarter fiscal 2010 beat the Zacks Consensus Estimate by a penny while profit plummeted 35% year over year as the year-ago profit was boosted by one-time gains from asset sale and extinguishment of debt.
Revenuesimproved narrowly year over year while missing the Zacks Consensus Estimate. Sales were impacted by an unfavorable foreign exchange translation and a soft U.S. economy.
American Medical’s Men’s Health segment revenues rose marginally as higher sales from male continence product lines were partly marred by a relatively flat erectile restoration business. Sustained healthy performance of pelvic floor repair products fueled a 6% revenue growth at the company’s Women’s Health division.
Minnesota-based American Medical is a world leader in manufacturing medical devices and procedures for treating health problems of both men and women. In addition to the U.S., the company sells its products in Canada, Asia, Australia, Europe and South America.
American Medical has a strong pipeline and remains focused on rolling out new products to drive growth. Other positive factors are represented by the company’s dominant position in both male and female incontinence markets and a sound balance sheet.
As part of its new product initiatives, the company expanded its benign prostatic hyperplasia (“BPH”) therapy range with the launch of GreenLight XPS laser therapy system in May 2010 and the next-generation BPH therapy system, MoXy Liquid Cooled Fiber, in September 2010.
However, American Medicalfaces stiff competition from larger players like Boston Scientific (BSX) and Johnson & Johnson (JNJ). Besides, the company is exposed to a significant reimbursement risk and its European markets are yet to recover from the macroeconomic headwinds. American Medical recently trimmed its fiscal 2010 revenue estimate factoringin the softness in U.S. procedure volume. All these factors have led us to take a cautious stance on the stock.
AMER MED SYS (AMMD): Free Stock Analysis Report
BOSTON SCIENTIF (BSX): Free Stock Analysis Report
JOHNSON & JOHNS (JNJ): Free Stock Analysis Report
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