Orthopedic devices maker, Wright Medical Group (WMGI) reported fourth-quarter and fiscal 2010 adjusted (excluding one-time items) earnings per share of 22 cents and 68 cents, narrowly beating the Zacks Consensus Estimates of 21 cents and 66 cents, respectively.
Reported net income shot up nearly four-fold year over year to $8.9 million (or 22 cents per share) in the reported quarter. The improvement occurred in the absence of certain write-downs and write-offs from the prior-period quarter.
Net sales for the quarter were $138.3 million, up 6% year over year in reported terms (7% on a constant currency basis), beating the Zacks Consensus Estimate of $130 million. Revenues were $519 million for fiscal 2010, up 6.5% in reported terms (6% in constant currency), also surpassing the Zacks Consensus Estimate of $511 million.
Revenues from the domestic market totaled $81.2 million (59% of total sales), up 3.7% year over year. Overseas sales increased 11%, in both reported and constant currency, to $57.1 million (41% of revenue).
Segment-wise Results
Wright Medical reports revenues in four key segments, namely Hip, Knee, Extremity and Biologics, which constituted 33%, 25%, 25% and 14%, respectively, of net sales for the quarter.
Hip and Knee products had an annualized constant currency revenue growth rate of 5% each. As in the past, Extremity did well and posted a sharp increase of 16%. Biologics sales were stagnant.
Wright Medical had gross margin of 70.8% in the quarter, approximately at par with 70.7% in the year-ago quarter. Operating margin was 11%, substantially higher than 3.5% in the year-ago quarter.
Balance Sheet
Cash and cash equivalents totaled $153.3 million, up 81.6% year over year. Long-term obligations remained approximately unchanged at about $202 million.
Other
On February 9, 2011, Wright Medical announced the release of the Evolve Elbow Plating System, which is an anatomic plating system geared to treat certain elbow fractures.
Outlook
Wright Medical issued sales forecast for fiscal 2011 in a band of $517 million to $535 million. Excluding the negative impact of its agreement with Kinetic Concepts (KCI), revenues are expected to grow in a range of 1% to 5%. The company expects earnings per share in a band of 88 to 95 cents, down 2% to up 6% year over year.
Our views are moderated by intense competition from larger players and pricing pressure. Wright Medical competes with much larger players such as Zimmer Holdings (ZMH), Stryker (SYK) and Smith & Nephew (SNN). We are currently Neutral on the stock, backed by a short-term Zacks #3 Rank (Hold).
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