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Investing.com -- Shares of Carl Zeiss Meditec AG (ETR:AFX) dropped 6% today after the company reported its first-quarter revenues, which showed a slight increase of 1.2% versus the Vara consensus but were coupled with challenges including a decline in the ophthalmology segment and weaker performance in China.
The company’s earnings before interest, taxes, and amortization (EBITA) also fell short of consensus expectations.
The ophthalmology segment saw a 7.1% organic decline, attributed to strong comparisons from the previous year and a reluctance in China to invest in equipment amid expectations of stimulus packages for medical equipment.
Additionally, price declines in intraocular lenses (IOLs) and a slowdown in demand for older equipment systems ahead of new product launches, particularly the Visumax 800 in China, impacted the segment’s performance. The microsurgery division also experienced a 7.8% decrease in constant currency in the first quarter, driven by product lifecycle effects and strong comparisons from the prior year.
Despite these challenges, Carl Zeiss Meditec’s EBITA reached €35.2 million, only €2.5 million below the Vara consensus of €38.1 million. This decline in EBITA was partly due to a decrease in gross margin caused by negative operating leverage on the manufacturing base and negative product mix effects, notably from the IOL price declines.
The company reiterated its guidance for the fiscal year 2024/25, anticipating "moderate growth" with EBITA and EBITA margin expected to be "stable or slightly higher" compared to 2023/24.
Carl Zeiss Meditec also confirmed that cost containment measures are ongoing. However, the company remains cautious about the macro environment, not expecting a quick recovery in equipment investment climate or a decrease in consumer spending pressure on elective procedures.
RBC analysts commented on the results, stating, "With these results largely in line with expectations (small revenue beat and a small Euro miss on EBITA on a broad consensus range), we expect investors to be somewhat reassured by the reiteration of, albeit qualitative, guidance. However, we do not see these results as necessarily meaningfully de-risking FY expectations, given the acceleration required through the remainder of the year to achieve consensus (in line with previous company commentary)."
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