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On Thursday, JPMorgan analysts downgraded CONMED Corporation (NYSE:CNMD), a $2.29 billion medical technology company with a "GREAT" InvestingPro Financial Health score of 3.35, from Overweight to Neutral and reduced the price target to $70.00 from the previous $85.00. The downgrade followed the company’s release of its financial updates, which presented a mix of results. Although CONMED reported a better-than-expected fourth quarter for 2024, concerns were raised due to its lower than anticipated earnings guidance for 2025.
CONMED’s fourth-quarter sales reached $346 million, marking a 6.0% increase on a constant currency basis and surpassing consensus estimates by $5 million. This performance contributes to the company’s impressive 10.23% revenue growth over the last twelve months, with a robust gross margin of 55.81%. The quarter’s success was primarily attributed to strong performance from its AirSeal system, although this was partly counterbalanced by ongoing supply issues in its Orthopedics division. Despite these challenges, the company achieved a gross margin improvement of 70 basis points and a reduction in operating expenses by 90 basis points.
Earnings for the quarter came in at $1.34 per share, a 27% increase and notably higher than the Street’s expectation of $1.20, even in the face of a $0.03 impact from elevated tax rates. However, the optimism from the quarterly results was dampened by CONMED’s initial guidance for 2025. The company forecasts earnings to be between $4.25 and $4.40 per share, significantly below the consensus estimate of $4.74 and JPMorgan’s own projection of $4.60.
The guidance has been set amidst a CEO transition, which JPMorgan analysts see as an opportunity for the company to establish a more achievable target for the year while still allowing for potential positive surprises. However, given CONMED’s history of execution issues in recent years, the analysts expressed difficulty in maintaining a positive outlook for the company as it enters another year with expectations of a stronger second half. Despite these concerns, InvestingPro analysis suggests the stock is currently undervalued, trading at 17.17x earnings, and maintains a perfect Piotroski Score of 9, indicating strong financial fundamentals. Subscribers to InvestingPro can access the comprehensive Pro Research Report for detailed analysis of CONMED’s valuation and growth prospects, along with 6 additional exclusive ProTips.
In other recent news, CONMED Corporation has announced a quarterly cash dividend of $0.20 per share, indicating the company’s ongoing commitment to return value to its investors. This dividend is payable to shareholders of record as of December 20, 2024, and is set to be distributed on January 3, 2025.
In addition to this development, Stifel analysts have maintained their Buy rating and $72.00 target for CONMED, as part of their new purchasing analysis series. This series focuses on hospital insufflation products, a segment where CONMED’s Airseal system has a significant presence.
The analysis, based on third-party data, aimed to assess the potential impact of competing technologies on CONMED’s sales and top-line growth. Despite concerns about the introduction of Intuitive Surgical (NASDAQ:ISRG)’s da Vinci (EPA:SGEF) 5 system, the study revealed that Airseal’s sales continued to grow, registering an 11.0% increase over the full year.
Furthermore, the data indicates that the utilization of Airseal consumables experienced an uptick, and the pricing saw a low-to-mid single-digit increase in 2024. Stifel’s analysis suggests that competing technologies have not significantly affected CONMED’s Airseal product performance in 2024, hinting at a continued growth potential for the company’s insufflation products.
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