ZOLL Posts Mixed 1Q Results - Analyst Blog

Resuscitation devices maker ZOLL Medical (ZOLL) reported first-quarter fiscal 2011 (ended January 2) earnings of 18 cents per share, beating the Zacks Consensus Estimate of 16 cents and surpassing the year-ago earnings of 11 cents. Profit catapulted 69% year over year to $3.9 million, boosted by higher sales.

Revenues climbed 8% year over year to $113.2 million, but trailed the Zacks Consensus Estimate of $116 million. Sales were supported by sustained strong performance of the company's LifeVest wearable defibrillator business. Total order backlog at the end of the quarter was roughly $13 million, down 23.5% year over year.

Sales in the North American hospital market rose 2% year over year to $30.6 million, manifesting signs of some recovery in this business. Within this category, U.S. military sales surged 32% year over year to $8.6 million. The Propaq MD defibrillator has been a major boost for this business.

Revenues from North American pre-hospital market dipped 10% year over year to $27.4 million while International sales leaped 10% to $32.8 million. Softness in the North American pre-hospital market is expected to sustain through fiscal 2011, partly due to a still soft capital spending backdrop.

The LifeVest business continued strong growth momentum with revenues zooming 50% year over year to $22.3 million, benefiting from sales force enhancements and increased awareness of the product. Revenues from the AutoPulse cardiac support pump soared 25% to $4.8 million backed by strong overseas performance. Temperature Management business posted sales of $5.9 million in the quarter, up 28%.

Gross margin edged up to 54% in the quarter from 53% a year-ago, reflecting better pricing in the North American core defibrillator business and improved mix. Total expenses increased roughly 7% year over year to $56 million. ZOLL Medical exited the quarter with cash and cash equivalents and short-term investments of roughly $71 million, up 11% year over year, with no debt.

ZOLL Medical is a leading player in the global market for external defibrillators, which is worth more than $1 billion. The company is expanding its presence in the international markets, representing a major impetus for growth.

In the U.S. defibrillation market, ZOLL Medical competes with Physio-Control, a wholly-owned unit of Medtronic (MDT) and Philips (PHG). The company remains committed to expanding its product range to sustain growth in this market.

We are pleased with ZOLL Medical's solid fundamentals, its broad product range, healthy revenue/margin mix and upbeat prospect for its LifeVest wearable defibrillator business. Moreover, its significant international presence should also drive growth.

However, ZOLL Medical operates in a highly competitive defibrillation market In the U.S and the North American emergency medical services (“EMS”) market remains sluggish, in part, due to budget constraints. Currently, we have a Neutral recommendation on ZOLL Medical.

 
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