ZOLL Upgraded to Outperform - Analyst Blog

We are upgrading ZOLL Medical Corp. (ZOLL) to Outperform from Neutral. We are pleased with the company’s wide range of products and significant international presence. The company has made multiple acquisitions in the past, which have aided growth and is looking out for more such opportunities.
 
Headquartered in Chelmsford, Massachusetts, and founded in 1980, ZOLL Medical Corporation designs, manufactures, markets and sells non-invasive resuscitation devices and related software solutions both in the U.S. and overseas. 

The solutions include defibrillation devices with/without the pacing option, such as ZOLL's M Series, E Series, R Series, automated external defibrillator (AED) Plus, AED Pro, and LifeVest Wearable Defibrillator. Furthermore, these solutions include a circulatory assist device called AutoPulse. The product pipeline also includes a unique fluid resuscitation product, called the Power Infuser, manufactured by Infusion Dynamics, a division of ZOLL. These devices help healthcare professionals, emergency medical service providers, and first responders to diagnose and treat cardiac arrest, wherever it occurs. 

ZOLL Data Systems, a subsidiary of ZOLL Medical Corp., designs and markets software that automates collection and management of clinical and non-clinical data. ZOLL has operations in the United States, Canada, Germany, Austria, France, the Netherlands, New Zealand, United Kingdom, and Australia, and has distributorships and sales representative business relationships in the world’s major markets.
 
The company divides its market for non-invasive cardiac resuscitation equipment into three principal customer/geographic categories:  North American hospital, North American pre-hospital (which consists of emergency medical services (EMS) and public access segments), and international. The pre-hospital EMS segment consists of care providers, such as paramedics, ambulance operators, emergency medical technicians, firefighters, police, and other first-response personnel with responsibilities for public safety. 

The pre-hospital public access segment includes non-traditional responders to medical emergencies, who have the capability to use simplified AEDs. This includes security personnel, staff in occupational settings, school personnel, and office staff. The international segment includes both hospital and pre-hospital customers outside North America. Based on fiscal year 2009 results, the North American pre-hospital, International, North American hospital, and other revenues (consisting of components, including electrodes) for North America contributed 44.4%, 25.4%, 24.2%, and 6.0%, respectively, to total revenues of $385.2 million.
 
The company has a significant presence in the international market, which includes both hospital and pre-hospital customers outside of North America. In fiscal 2009, 25.4% of total revenues came from international markets. ZOLL conducts international business through subsidiaries in Canada, Germany, Austria, The Netherlands, France, Australia, New Zealand, and the United Kingdom. The company operates a number of additional international offices and has entered into distributor and sales representative business relationships in the world’s major markets. ZOLL sells its products in more than 140 countries. The significant international presence has boosted its growth and we believe will continue doing the same in the coming years.
 
The company is a leading player in the global market for external defibrillators which is worth over $1 billion annually. The company introduced a wide range of innovative product features that have become the standard of care in the external defibrillator industry. The company is expanding its offerings to sustain growth.  We believe that ZOLL’s wide range of products, which include pacing, defibrillation, circulation, ventilation, and fluid resuscitation devices that enable EMS professionals and lay rescuers resuscitate sudden cardiac or trauma victims coupled with its expansion initiatives will continue driving the company in the coming years.
 
The company has completed multiple acquisitions over the past few years, which have expanded its product portfolio and client base and is on the lookout for more such profitable transactions to aid growth. Consequently, we upgrade the stock to Outperform with a target of $31. The price target is based on our 39.2x our 2010 EPS estimate of 79 cents.
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