About a year ago I expressed the opinion that medical device makers may be more immune from the biotech implosion than other biomedical sectors.
As a reflection of this perspective, I've invested in Hypertension Diagnostics (HDII), a manufacturer of a cardiovascular profiling device (see the HDII thread).
The following article appeared today:
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Wednesday April 4, 8:12 am Eastern Time
Medical Device Profits to Stay Sharp
By Julie Steenhuysen
CHICAGO (Reuters) - A flagging U.S. economy likely did not drag down earnings at most medical device makers in the first three months of the year, although negative currency translations once again trimmed profits for companies not adequately protected, analysts said.
``Unlike a lot of other sectors, we're not going to see a lot of companies missing their numbers in med tech,'' said medical device industry analyst Matt Dodds at SG Cowen Securities Inc., who believes some firms may even exceed earnings projections.
``I had no earnings dial-downs,'' said healthcare industry analyst Thomas Gunderson at U.S. Bancorp Piper Jaffray. ``The economy is not hurting these companies to the extent that it's hitting other sectors.''
Sales of the 15 largest medical technology companies tracked by SG Cowen should rise 6 percent, with earnings per share up 10 percent, slightly below the 11 percent EPS growth in fourth quarter 2000, Dodds said.
Nevertheless, currency fluctuations continue to dog medical device firms. ``Currency translation will still be a factor,'' Dodds said. ``It looked good at the beginning of the quarter, but toward the end both the yen and euro fell off.'' His company projects currency translation losses will clip three percentage points from sales growth for the quarter.
A weak euro and yen already have hurt revenues at the sector's largest device maker. In a March 26 earnings update to analysts, Minneapolis-based Medtronic Inc. warned that weakness in the euro and yen likely will shave $40 million to $45 million in revenues from the company's fiscal fourth quarter ending in April, some $10 million more than the company had expected. Still, the company expects to meet earnings projections, thanks to hedging efforts.
``Because of operational improvements, that didn't affect earnings for Medtronic,'' said healthcare industry analyst Sandra Hollenhorst of Prudential Securities.
Hollenhorst said surprises in the sector could come from Boston Scientific Corp. , which recently has been on an acquisition tear, buying a company a week. ``They were unwilling to provide any guidance for the quarter,'' she said. ``I have no idea what the final impact of the acquisitions will be. Their numbers have continued to come down on the Street as these deals have been finalized,'' she said.
Another earnings wildcard in the sector is Guidant Corp., which recently halted production of its Ancure device for treating abdominal aortic aneurysms.
St. Jude Medical Inc., which received regulatory approval for its Photon dual-chamber implantable cardio defibrillator in October, may come in with strong sales. ``They're going to have a strong quarter and there could be an upside with the Photon,'' Dodds said.
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