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Orthopedic and Dental Industry News Complete Archive »

Encore Medical (ENMC:NASDAQ) Reports Revenues Totaled $29.3 Million for the 2Q:04; Analyst were Expecting $30.4 Million BY JOHN CHOPACK, AUGUST 16, 2004

The slight miss in net revenues combined with missing analyst EPS expectations by $0.01 ($0.04 reported versus a $0.05 estimate) sent shares of ENMC downward by 23% on Monday. Encore follows Stryker, Exactech, Wright, and Zimmer who have all seen their market capitalizations drop upon their respective 2Q:04 earnings report.

ENMC announced that Surgical Implant revenues increased by 16% worldwide and 25% in the U.S. during the 2Q:04. The primary drivers of Surgical Implant sales were the Keramos ceramic-on-ceramic hip, which drove a 25% increase in domestic hip sales and now represent 25% of all acetabular hip sales. The recent introduction of the 3DKnee system supported a 40% increase in domestic knee sales over the 2Q:03.

Orthopedic Rehab products totaled $19 million during the 2Q:04, an 8% increase over the 2Q:03 and 65% of current net revenues. Management pointed out that electrostimulation and ultrasound therapy products were the key drivers of the Orthopedic Rehab sales.

Management indicated that there was nothing that should preclude its BioHorizons acquisition from being closed during the 3Q:04. It also mentioned that a majority of BioHorizons shareholders have already approved the deal. Since the Company announced the deal in May, Encore's stock has fallen approximately 40%, reducing the net deal value from $26 million to $17 million, representing a 35% decline.

When asked about guidance for the 3Q:04 and FY2004, management indicated that it was currently in acquisition discussions and felt that it wouldn't be the right time to issue any new guidance. Instead, it is likely to wait until its BioHorizons deal closes and the potential announcement of an additional acquisition in the next couple of months is made before issuing any revised revenues and/or earnings guidance.

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