CR Bard Remains Neutral - Analyst Blog

By Zacks | December 06, 2012 AAA

We have reiterated our Neutral rating on CR Bard Inc. (BCR) following its third quarter results with a price target of $103. In the reported quarter, adjusted earnings of $1.64 per share surpassed the Zacks Consensus Estimate by a penny and surpassed the year-ago earnings of $1.62 per share by two cents. However, net income declined 1% as higher operating expenses dampened moderate revenue growth in the quarter.

Revenues inched up 1% (up 3% in constant currency) year over year to $722.9 million, but fell short of the Zacks Consensus Estimate of $735 million. Moderate growth across Urology and Oncology product groups were partially offset by declining Vascular sales.

In the third quarter, CR Bard acquired privately-owned Neomend Inc. to expand its surgical specialty product line.

CR Bard's vast product portfolio insulates it from fluctuations in any single therapeutic category. The company aims to achieve long-term growth by focusing on acquisitions, internal Research and Development (R&D) and strategic investments in higher growth markets. Moreover, potential benefit from the Gore litigation along with new product launches should enable the company to drive organic growth.

Although it constitutes a small portion of total sales, positive returns from the businesses in emerging markets have contributed to the company's growth. Moreover, CR Bard remains committed to delivering incremental returns to investors by leveraging its solid balance sheet, healthy free cash flow and earnings power.

However, the company continues to face procedure volume headwind in the domestic U.S. market. Moreover, government-mandated healthcare reforms in the U.S. have led to a less flexible pricing environment and may pressurize prices further.

In addition, increasing competition from strong players like Boston Scientific Corporation (BSX), Johnson & Johnson (JNJ) and AngioDynamics Inc. (ANGO) remains a matter of concern.

Our Neutral recommendation on the stock carries a short-term Zacks #4 Rank (Sell).

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