Symmetry Remains Neutral – Analyst Blog

We recently reiterated our ‘Neutral’ rating on Symmetry Medical Inc. (SMA) with a target price of $12 based on a P/E of 25.5x our fiscal 2010 earnings per share (EPS) estimate of 47 cents. The company’s results for the first quarter 2010 were mixed.

 

Symmetry reported first quarter 2010 earnings per share of 6 cents, beating the Zacks Consensus Estimate of 5 cents. However, earnings were considerably lower than the year-ago figure of 19 cents.

 

Total revenues in the first quarter declined 17% year over year to $84.5 million. The decline was due to lower customer demand across all business segments.

 

Instruments, Implants, Cases and Other revenues declined a respective 28%, 3%, 8% and 19% year over year to $33.4 million, $28.2 million, $17.0 million and $5.9 million in the first quarter.

 

Symmetry reported a contraction in margins in the first quarter. Gross margin declined 400 basis points (bps) year over year to 20.2%. Selling, general and administrative expenses as a percentage of sales increased 180 bps year over year to 14.9%.

 

Excluding facility consolidation and severance costs, adjusted operating and net margins declined 590 bps and 440 bps year over year to 5.2% and 2.4%, respectively.

 

However, Symmetry has raised its revenue and earnings per share guidance for fiscal 2010. Total annual revenues are expected between $330 and $340 million, compared with the previous guidance of $320 to $340 million. EPS is expected to be in the range of 45 to 50 cents versus the prior guidance of 43 to 50 cents.

 

Symmetry is the largest original equipment manufacturer-provider of orthopedic implants and instruments to orthopedic device manufacturers. The company has created a distinct competitive position in the orthopedic device market with its Total Solutions Approach.