Symmetry Medical’s (SMA) third-quarter fiscal 2010 adjusted earnings per share of 10 cents missed the Zacks Consensus Estimate of 17 cents and were also below the year-ago earnings of 16 cents. Adjusted earnings exclude facility consolidation costs and employee severance payments. Net income slid 33% year over year to $3.6 million as revenue growth was more than offset by higher expenses.
Revenues rose 5% year over year to $91.5 million, ahead of the Zacks Consensus Estimate of $90 million, supported by improved demand across the company’s orthopedic implants and medical devices businesses as reflected by higher customer orders.
By product lines, surgical instruments sales clipped 13% year over year to $36 million. Orthopedic implants revenues surged 17% to $28.3 million. Revenues from orthopedic, endoscopy and dental cases business soared 31% year over year to $21.5 million while other revenues increased 8% to $5.7 million.
Symmetry continues to experience contraction in its margins. Gross margin fell to 21.7% from 24.9% a year-ago on account of higher cost of sales (up 9.6% year over year) due to increased manufacturing expenses. Operating margin declined to 8.2% from 12% a year-ago as the company spent more on selling, general and administrative expenses (up 15.7%).
Balance Sheet
Symmetry exited the quarter with cash and cash equivalents of roughly $13.9 million, down 15% year-over-year. Total long-term debt declined 13% year-over-year to $88.1 million.
Outlook
Symmetry has raised its revenue guidance for fiscal 2010 to $360 million to $364 million from the earlier forecast of $340 million and $350 million. Earnings per share target, however, have been trimmed to a range of 41 to 45 cents from 45 to 50 cents. The current Zacks Consensus Estimates for revenues and EPS are $347 million and 48 cents, respectively.
For the fourth quarter, Symmetry expects revenues between $95 million and $99 million and earnings per share in the range of 14 to 18 cents. The company’s guidance is based on favorable foreign exchange impact, current inventory levels, product launches by customers and sequential increase in operational efficiency vis-à-vis the third quarter.
Symmetry is the largest OEM provider of orthopedic implants and instruments to orthopedic devices manufacturers. The company has created a distinct competitive niche in the orthopedic devices market with its “Total Solutions Approach.”
Under this strategy, customers are provided with a broad range of products relating to orthopedic implants as well as comprehensive services and production capabilities to bring these implant systems to the market in a timely and cost-efficient manner.
Symmetry Medical has diversified its offerings into areas outside of orthopedics like dental, osteobiologic, and endoscopy. Currently, we have a Neutral recommendation on Symmetry Medical, which is supported by a short-term Zacks #3 Rank (Hold).
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