CONMED Q2 Earnings Beat, Sales Rise Y/Y, '24 View Cut

CONMED Corporation CNMD delivered adjusted earnings per share of 98 cents in the second quarter of 2024, which beat the Zacks Consensus Estimate of 92 cents by 6.5%. The bottom line improved 18.1% from the year-ago quarter's level.

GAAP EPS for the quarter was 96 cents compared with 43 cents per share in the year-ago period.

The company's shares have lost 14.7% in the past six months against the industry's rise of 1.5%. The broader S&P 500 Index has gained 11.7% in the same time frame.

Image Source: Zacks Investment Research

Revenues in Detail

CONMED's revenues totaled $332.1 million, up 4.5% year over year. The top line missed the Zacks Consensus Estimate by 0.7%. At constant exchange rate (CER), revenues increased 5.2%.

CNMD's second-quarter sales were driven by strong growth in the United States as well as international markets. The second quarter witnessed steady surgical volumes. The performance of CONMED's BioBrace in the foot and ankle space seemed encouraging.

Segmental Details

Revenues in the Orthopedic Surgery segment totaled $139.5 million, down 0.9% from the year-ago quarter's level on a reported basis. At CER, revenues decreased 0.1%.

Sales declined 0.4% on a reported basis in the United States. Sales decreased 1.2% (up 0.1% at CER) from the prior-year quarter's level in the international markets.

Revenues in the General Surgery segment amounted to $192.6 million, up 8.9% year over year on a reported basis and 9.4% at CER. U.S. sales increased 8.9% year over year. International sales improved 8.8% on a reported basis (10.5% at CER).

Sales by Geography

Sales in the United States totaled $185.4 million, up 6.1% year over year. International sales amounted to $146.7 million, up 2.6% year over year on a reported basis and 4% at CER.

Margins

CONMED's gross profit improved 7.6% to $183.7 million. The gross margin improved 160 basis points to 55.3%.

Selling & administrative expenses decreased 5.5% to $122.5 million. Research and development expenses rose 3.9% year over year to $14.1 million.

The company recorded an operating income of $47.1 million compared with $27.4 million in the prior year quarter. The operating margin was 14.2%, up 560 basis points.

2024 Guidance Revised

CONMED lowered its revenue and earnings guidance for 2024 based on incremental foreign currency headwinds.

The company expects revenues between $1.305 billion and $1.315 billion for 2024 compared with the prior guidance of $1.330 billion and $1.355 billion. The Zacks Consensus Estimate is currently pegged at $1.34 billion.

Adjusted EPS is expected to be in the range of $3.95 to $4.02 compared with the prior guided range of $4.25 to $4.35. The Zacks Consensus Estimate is currently pegged at $4.30.

Our Take

CONMED exited the second quarter of 2024 on a mixed note, wherein earnings beat the Zacks Consensus Estimate, but revenues missed the same. The second quarter witnessed the impact of supply-chain issues, primarily for the sports medicine and foot and ankle businesses within the Orthopedic segment. The issue is likely to continue, which is reflected in the company's lowered outlook for 2024.

However, healthy demand in the General Surgery business is likely to help offset supply-chain issues hurting Orthopedic sales. The company's early-phase new surgical robot, AirSeal, demonstrated faster growth compared to last year, and the trend is likely to continue in the second half of 2024.

Zacks Rank and Stocks to Consider

Currently, CONMED carries a Zacks Rank #4 (Sell).

Some better-ranked stocks in the broader medical space are Universal Health Service UHS, Quest Diagnostics DGX and ABM Industries ABM. While Universal Health Service sports a Zacks Rank #1 (Strong Buy), Quest Diagnostics and ABM Industries carry a Zacks Rank #2 (Buy) each.

Universal Health Service has an estimated long-term growth rate of 19%. UHS' earnings surpassed estimates in each of the trailing four quarters, with the average being 14.58%.

Universal Health Service has gained 41.1% compared with the industry's 34.8% rise so far this year.

Quest Diagnostics has an estimated long-term growth rate of 6.20%. DGX's earnings surpassed estimates in each of the trailing four quarters, with the average surprise being 3.31%.

Quest Diagnostics shares have gained 3.7% so far this year compared with the industry's 10.2% rise

ABM Industries' earnings surpassed estimates in each of the trailing four quarters, delivering an average surprise of 7.34%.

ABM's shares have risen 24.1% so far this year compared with the industry's 11.9% increase.

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